World stocks in red as consumers signal an imminent recession

LONDON/TOKYO, June 29 (Reuters) – Global stock markets tumbled for a second straight day on Wednesday and bond yields fell amid growing fears that policymakers bent on curbing inflation are shutting down their economies could precipitate a recession.

A string of weak data releases in Europe and the United States hasn’t stopped central bankers from ramping up their dovish rhetoric. More is likely later on Wednesday when the governors of the European Central Bank, US Federal Reserve and Bank of England address a central bank forum.

Tuesday’s data showed US consumer confidence slipped to a 16-month low in June, yet several Fed officials pledged more rapid rate hikes, citing the need to rein in “unbridled” inflation read more.

These US numbers sparked precipitous falls on Wall Street, sending the S&P 500 and Nasdaq indices down 2% and 3% respectively (.SPX), (.NQC1), after a series of dismal consumer confidence numbers across Europe.

That weaker momentum continued into Wednesday, sending an Asian ex-Japan index down 1.4% (.MIAPJ0000PUS), while a pan-European equity index (.STOXX) fell 0.3%, kicking off a three-day rally.

US and German 10-year bond yields fell 5-6 basis points, the former more than 30 basis points from mid-June highs.

Deteriorating consumer sentiment clearly points to a recession, Citi told clients.

After annual inflationary prints of 7.5% to 7.9% in German provinces later in the day, the country is expected to return 8% in June versus 7.9% in May.

Paul O’Connor, head of Janus Henderson’s multi-asset team in London, predicted “stormy” markets as long as growth-inflation question marks remain.

“The problem is that the level of inflation is so problematic in so many parts of the world and we’re a long way from central banks being able to say the job is done,” O’Connor said.

“We will no doubt get growth downgrades over the summer, but we will also get an increasing perception of recession risk and I don’t think markets are fully priced in for that.”

Sentiment had improved early Tuesday when it was announced that China was relaxing quarantine requirements for inbound passengers as part of a major relaxation of its “zero-COVID” strategy [nL1N2YF06Q]

While parts of the Chinese stock market, including real estate, extended gains on Wednesday, the positive impact of the news largely faded – Chinese blue chips, which hit a four-month high on Tuesday, fell 1.5% and Hong Kong fell 2% (.CSI300 ), (.HSI)

“Inevitably, markets tend to overreact to this type of news,” said Carlos Casanova, senior economist at UBP in Hong Kong. “For this to be sustainable we really want these measures to result in an actual reopening.”

Wall Street futures are flat.

OIL AND DOLLARS

Inflation fears have been further fueled by three consecutive days of oil price gains that have taken Brent crude futures above $117 a barrel.

“The market is caught between the current deteriorating macroeconomic backdrop and the looming threat of a recession pitted against the strongest fundamental oil market constellation in decades, perhaps ever,” RBC Capital’s Mike Tran told clients.

The group of OPEC+ crude oil exporters started a two-day meeting on Wednesday, but a major change in policy looks unlikely as UAE Energy Minister Suhail al-Mazrouei is already suggesting his country is pumping near capacity. Continue reading

Market nervousness is driving renewed bids for the dollar, lifting it to a one-week high against a basket of currencies.

The euro fell 0.6% against the greenback overnight but was trading at $1.0514 at 08:30 GMT, while the yen was at 136.13 per dollar not far from last week’s 24-year low of 136 .7 was removed.

Reporting by Sujata Rao in London and Sam Byford in Tokyo; Editing by Nick Macfie

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