Global stocks hit six-week low

Stocks fell with US equity futures yesterday and the dollar jumped as a lockdown in a Chinese metropolis and a hawkish drumbeat from central banks further frayed investor nerves.

A global equity index hit a six-week low, dragged down by a slide in Asian shares amid a retreat in tech firms. S&P 500 and Nasdaq 100 contracts slid partly on a tumble in chipmaker Nvidia Corp over a sales warning.

China moved to lock down Chengdu, a city of 21 million residents, from Thursday night to tackle Covid. It’s the biggest Chinese city to face such curbs since Shanghai’s bruising two-month crisis earlier this year.

The market jitters come after the worst month since June for US shares, reflecting fears of an economic downturn alongside restrictive monetary policy to choke inflation. A global bond selloff saw the two-year Treasury yield touch 3,50 percent for the first time since 2007. Commodity-linked and Group-of-10 currencies weakened, while the yen fell to a fresh 24-year low — heading closer to the 140 per-dollar level.

Stocks are entering a month that is often poor for returns after an August of losses across asset classes. An equity bounce from June lows is fizzling as the Federal Reserve pushes back against bets on tempered rate hikes. Global bonds, meanwhile, are near their first bear market in a generation.

The market is getting the message that the Fed is going to fight inflation at all costs, Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg Radio, adding “I don’t think we’ve seen the bottom for this year.”

No cuts

Cleveland Fed president Loretta Mester reiterated the central bank needs to raise its benchmark rate above 4 percent by early next year. She said she doesn’t anticipate rate cuts in 2023. Elsewhere, oil was on the back foot, sliding to about $89 a barrel. Aggressive Fed tightening and China’s slowdown are dimming the demand outlook. Bitcoin weakened, hovering around the closely watched US$20 000 level.

The latest economic data underlined a parlous outlook for China. A private survey suggested factory activity contracted in August, sapped by power shortages and Covid-linked curbs. – Bloomberg

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