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Stock markets fell on Thursday amid growing concern about the outlook for the global economy, after days of strong movements government bonds this hinted at slower-than-expected growth and inflation.
Shares fell first in Asia before the negative mood spread to Europe and then on Wall Street, a move analysts blamed on expectations that U.S. economic growth is about to culminate in at the same time signs of a slowdown appear in China.
The US S&P 500 index closed down 0.9%, while the technology-focused Nasdaq Composite fell 0.7%. Both indices had set records in recent days.
In Europe, Stoxx Europe 600 across the continent lost 2% after Hong Kong’s Hang Seng index ended the session 2.9% lower. The Spanish Ibex closed 2.3% and the Italian FTSE MIB lost 2.6%. The FTSE 100 in the UK fell 1.7%.
“We are seeing a change in asset allocation with people selling risky assets across the market and buying the safest yields on government bonds,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management.
Agitated movements in government bond markets resumed on Thursday. The performance of the 10-year U.S. Treasury note, which moves inversely to its price, fell to 1.276 percent and traded down 0.02 percentage points on the day to stand at 1.29 percent.
The decline placed the yield on the world’s benchmark bonds, which is influencing borrowing costs for businesses and households around the world, at its lowest level since early February and well on track. biggest weekly drop since June last year.
This marked a contrast since the first half of this year, when investors worried about the overheating of the US economy and Treasury sold – whose fixed interest rates are eroded by inflation – to buy shares in companies in economically sensitive industries such as banking and energy.
In minutes of the last meeting of the US central bank published Wednesday, Federal Reserve officials said “uncertainty about the economic outlook was high.” Wall Street economists expect U.S. gross domestic product to expand at an annualized rate of more than 9% in the second quarter of this year and moderate afterwards.
Also Wednesday, the Chinese government said it would use it “Timely” cuts in the reserve ratio requirements of banks to keep money flowing around the economy. According to Daiwa economist Chris Scicluna, investors took this as a signal that China’s second-quarter GDP data to be delivered next week “could fall short of market expectations.”
Chinese ports and factory districts have faced outbreaks of the Delta variant of the coronavirus, as have a growing number of countries around the world. Japan said Thursday that Tokyo will be in a state of emergency during all the Olympics, which will begin on July 23, to contain infections.
“Markets tend to focus on just a few things at a time,” Ramjee said. “The approach has shifted toward U.S. growth accelerating less than it has been before… And now there is more attention in China.”
Bank of America analysts Merrill Lynch said technical factors also played an important role in this week’s moves as investors sought to hedge the sharp bets expected to increase Treasury yields. long date.
The U.S. dollar index, which measures the green dollar against other major currencies, fell 0.3% on Thursday. Brent crude, the benchmark for oil, rose 1.2 percent more to $ 74.30 a barrel.
Government bonds also met in Europe. Germany’s ten-year Bund yield fell briefly 0.03 percentage points, to 0.323% less, the lowest since March. It later settled at 0.31% less.
Markets were trading “in line with expectations we have seen print the highest growth numbers” after last year’s coronavirus closures, said Maarten Geerdink, head of European equities at NN Investment Partners. He added that “price action” was “now self-sufficiency” as traders sold shares in case they were most affected.
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