Stock markets fell on Thursday amid growing concerns about the outlook for the global economy, after days of sharp government bond moves that hinted at slower growth and inflation than previously expected.
Shares fell first in Asia before the negative mood spread to Europe and then to Wall Street – a move that analysts have accused of expecting U.S. economic growth to peak soon at the same time as signs of a slowdown appear in China.
The U.S. S&P 500 fell 1 percent in afternoon New York City stores, while the technology-focused Nasdaq Composite fell 0.7 percent. Both indices have set records in recent days.
In Europe, the continent Stoxx Europe 600 lost 2 percent after the Hong Kong Hang Seng index ended the session 2.9 percent lower. Spain’s Ibex closed 2.3 percent and Italy’s FTSE MIB closed 2.6 percent. The FTSE 100 in the UK fell 1.7 percent.
“We are seeing a change in asset allocation with people selling risky assets and buying for safer government bond yields,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management.
There were again uncertain moves in government bond markets on Thursday. Yields on the ten-year U.S. Treasury bill, which ranges inversely from price, fell as much as 1.276 percent and traded 0.03 percentage points to 1.283 percent after lunch in New York.
The decline has put the reference bond yield in the world, which affects the cost of lending to companies and households around the world, to the lowest level since the beginning of February and on the right path for its biggest weekly decline since June last year.
This marked a contrast to the first half of this year when investors worried about the overheating of the US economy and sold treasuries – whose fixed interest payments are eroded by inflation – for the purchase of shares in companies in economically sensitive industries such as banking and energy.
In minutes from the most recent meeting of the US Federal Reserve released on Wednesday, Federal Reserve officials said “uncertainty about the economic outlook has increased”. Wall Street economists expect U.S. gross domestic product to increase at an annual rate of more than 9 percent in the second quarter of this year, and then moderate.
Also Wednesday, the Chinese government said it would use it “Timely” cuts in a mandatory ratio of banks to keep money flowing around the economy. Investors saw this as a signal that Chinese GDP data for the second quarter, which will happen next week, “could be below market expectations,” according to Daiwe economist Chris Scicluni.
Chinese ports and factory districts are facing attacks of the Delta variant of coronavirus, as well as a growing number of countries around the world. Japan declared on Thursday that Tokyo will be in a state of emergency during the entire Olympic Games, which begin on July 23, with the content of infections.
“Markets focus on just a few things at once,” Ramjee said. “The focus has shifted to US growth, which is accelerating less than it was. . . and now more attention is being paid to China. ”
Bank of America Merrill Lynch analysts said technical factors also played a role in this week’s moves as investors sought to cover bookmakers that Treasury’s long-term returns would rise.
The U.S. dollar index, which measures the return of money against other major currencies, fell 0.3 percent on Thursday. Brent crude, the benchmark for oil, was $ 73.46 a barrel.
Government bonds have also accumulated in Europe. The German 10-year yield briefly fell 0.03 percentage points to minus 0.323 percent, the lowest level since March. It later dropped to minus 0.31 percent.
Markets traded “on expectations that we recorded the highest growth numbers” after last year’s coronavirus shutdown, said Maarten Geerdink, head of European stocks at NN Investment Partners. He added that the “price action” was “now single” because traders were selling shares in case they were hit harder.