Global markets plunge amid US rate worries, China’s economic woes, and Middle East tensions

Global markets are reeling as European stocks plummet, echoing significant declines in Asia and on Wall Street. This downturn is driven by persistent high U.S. interest rates, a lacklustre recovery in China’s economy, and escalating Middle East tensions. The Stoxx Europe 600 sees its sharpest drop since October, while U.S. futures dip and Asian stocks record their biggest fall since August. Amidst this turmoil, investors flock to the safety of the dollar, which strengthens across major currencies.

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By Winnie Hsu and Robert Brand

European stocks tumbled, following a selloff in Asia and on Wall Street that was sparked by angst over elevated US interest rates and fueled by signs of fading momentum in China’s economy and rising tensions in the Middle East. ___STEADY_PAYWALL___

The Stoxx Europe 600 plunged more than 1.3%, on track for its biggest one-day drop since October. US equity futures edged lower after the S&P 500 fell to the lowest in more than a month as hot retail sales data spurred bets the Federal Reserve will be in no rush to ease policy. A gauge of emerging-market stocks slumped the most since January.

The dollar gained against all its G-10 peers as traders sought havens after top Israeli military officials reasserted that their country has no choice but to respond to Iran’s weekend drone and missile attack.

In Asia, a gauge of regional stocks sank the most since August, with every major market seeing broad-based losses, after a slew of China’s economic indicators showed that the nation’s economic recovery remains patchy.

“The carnage is the result of a perfect storm: stretched positioning across global equity indexes, a third successive month of firm US inflation data contributing to unease within a deeply troubled bond market against the rising risk of miscalculation and escalation in the Middle East,” said Tony Sycamore, market analyst at IG Australia.

A slew of China’s economic data points showed that the nation’s economic rebound remains uneven. While both gross domestic product and fixed assets investment beat forecasts, data on retail sales and industrial output fell short of estimates. 

“China data appears to be strong on the headline, but the details are weak,” said Charu Chanana, head of foreign-exchange strategy at Saxo Markets in Singapore. “This would suggest that the economy needs more support, and markets will continue to position for a weak yuan.”

The Japanese yen remained under pressure, after surging to a new 34-year low against the dollar overnight. 

Brent crude held above  $90 a barrel, and gold was steady.

Key events this week:

  • Germany ZEW survey expectations, Tuesday
  • US housing starts, industrial production, Tuesday
  • Morgan Stanley, Bank of America earnings, Tuesday.
  • Fed Vice Chair Philip Jefferson speaks, Tuesday
  • BOE Governor Andrew Bailey speaks, Tuesday
  • IMF publishes its latest world economic outlook, Tuesday
  • Eurozone CPI, Wednesday
  • Fed issues its Beige Book, Wednesday
  • Cleveland Fed President Loretta Mester speaks, Wednesday
  • Fed Governor Michelle Bowman speaks, Wednesday
  • BOE Governor Andrew Bailey speaks, Wednesday
  • Taiwan Semiconductor earnings, Thursday
  • US Conf. Board leading index, existing home sales, initial jobless claims, Thursday
  • Fed Governor Michelle Bowman speaks, Thursday
  • New York Fed President John Williams speaks, Thursday
  • Atlanta Fed President Raphael Bostic speaks, Thursday
  • BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
  • Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 1.3% as of 8:06 a.m. London time
  • S&P 500 futures fell 0.2%
  • Nasdaq 100 futures fell 0.1%
  • Futures on the Dow Jones Industrial Average fell 0.2%
  • The MSCI Asia Pacific Index fell 2%
  • The MSCI Emerging Markets Index fell 1.7%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro was little changed at $1.0617
  • The Japanese yen fell 0.1% to 154.45 per dollar
  • The offshore yuan fell 0.2% to 7.2713 per dollar
  • The British pound was little changed at $1.2439

Cryptocurrencies

  • Bitcoin rose 0.2% to $63,260.4
  • Ether rose 0.2% to $3,088.39

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.63%
  • Germany’s 10-year yield was little changed at 2.44%
  • Britain’s 10-year yield advanced two basis points to 4.27%

Commodities

  • Brent crude rose 0.2% to $90.32 a barrel
  • Spot gold fell 0.4% to $2,373.79 an ounce

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