Global stocks fall as growth fears linger, safe havens gain

A trader works on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., May 19, 2022. REUTERS/Andrew Kelly

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  • Global stocks slide as Wall St rally tumbles
  • Bonds rally to call for safety, dollar retreats from highs

NEW YORK, May 19 (Reuters) – Global stocks fell further on Thursday, unable to sustain a late rally on Wall Street as investors dumped stocks on fears of sluggish growth and bought safe-haven assets such as government debt and the Swiss franc.

Supply chain issues continued to fuel inflation and growth concerns as Cisco Systems Inc (CSCO.O) warned of continued component shortages, sending its shares down 13 .7%. The plunge made it the last major stock this week to post its biggest drop in more than a decade. Read more

Data showed factory output in the US Mid-Atlantic region slowed far more than expected in May, with business prospects for the next six months the weakest in more than 13 years, a survey found. regional Federal Reserve Bank. Read more

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Some megacap growth stocks that have underperformed this year have made gains, but the rally has fizzled. The Dow Jones Industrial Average (.DJI) fell 0.75%, the S&P 500 (.SPX) lost 0.58% and the Nasdaq Composite (.IXIC) fell 0.26%.

Big slides for Walmart on Tuesday and Target on Wednesday have demoralized investors wondering about rising costs in the supply chain, said Michael James, managing director of equity trading at Wedbush Securities.

“You have a pretty severe shock to the money manager system with the combination of these two,” James said. “This kind of damage is hard to undo, adding to the extremely difficult year that tech investors have had,” he said.

But James said there are those who see the market as extremely oversold and “you’re due for some kind of a bounce”.

Traders are looking for a catalyst that will turn the market around as it nears a near-term bottom, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC.

But “there’s probably still enough fear among investors to see a few more downdrafts,” he said.

Cash hoarding hit its highest level since September 2001, indicating strong bearish sentiment, according to Louise Dudley, portfolio manager at Federated Hermes Ltd.

Goldman Sachs estimates a 35% chance of a US recession over the next two years, while Morgan Stanley sees a 25% chance over the next 12 months.

U.S. spot electricity and natural gas prices hit their highest levels in more than a year in parts of the U.S. as Americans turned on air conditioners during a spring heatwave . Read more

The MSCI gauge of stocks around the world (.MIWD00000PUS) fell 0.65% and the pan-European STOXX 600 index (.STOXX) lost 1.37%.

The S&P 500 is down about 18% from its record close on Jan. 3, and the MSCI index has similarly fallen since its high on Jan. 4.

S&P 500 Bear Markets

The yield on German 10-year bonds fell below 1% and US Treasury yields fell as weaker US economic data raised fears that the Federal Reserve’s aggressive monetary tightening could hurt the global economy .

The 10-year Treasury yield fell 3.8 basis points to 2.846%, after hitting a three-week low of 2.772%.

The dollar fell across the board, retreating further from a two-decade high as most other major currencies lured buyers.

The dollar index fell 0.896%, with the euro up 1.11% at $1.0582. The Japanese yen strengthened 0.35% to 127.79 per dollar.

The Swiss franc rose after Swiss National Bank President Thomas Jordan signaled on Wednesday that the SNB was ready to act if inflationary pressures continued. Read more

Worst start to the year for global equities

Central banks are walking a tightrope, trying to regain control of decades-high inflation without causing painful recessions.

“We will have to discuss what we can do together in our respective areas of responsibility to avoid stagflation scenarios,” German Finance Minister Christian Lindner said upon arriving for a two-day meeting of top central bankers near from Bonn.

Oil prices rebounded after two days of losses in a volatile session, buoyed by dollar weakness and expectations that China could ease some lockdown restrictions that could boost demand.

U.S. crude futures rose $2.62 to settle at $112.21 a barrel. Brent settled $2.93 at $112.04 a barrel.

US gold futures rose 1.4% to $1,841.20 an ounce as a weaker dollar and Treasury yields boosted the appeal of safe-haven bullion.

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Reporting by Herbert Lash, additional reporting by Marc Jones in London, Francesco Canepa in Koenigswinter, Germany, Stella Qiu in Beijing and Alun John in Hong Kong; Editing by Bernadette Baum, David Gregorio and Richard Pullin

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