China worries weigh on global stocks

Investors were concerned about the impact of the Covid outbreak in China and rising interest rates in the United States, thus stock markets fell sharply on Tuesday.

The gains on Wall Street failed to gain traction, and a relief rally in Europe faded as the day progressed.

The euro fell to a two-year low against the dollar, boosted by its role as a safe haven amid the Ukraine crisis.

However, after suffering significant losses in recent days due to concerns about weakening Chinese demand, world oil prices have recovered.

“The inability of equity markets to hold on to today’s initial gains doesn’t bode particularly well and speaks to a general lack of confidence more broadly about the economic outlook, and the ability of central banks to engineer a ‘soft landing’ as they look to tackle inflation,” said market analyst Michael Hewson at CMC Markets.

Even data showing a resurgence in orders of US durable goods in March, according to Patrick J. O’Hare, was unable to change the mood.

It’s “another sign that market players are skeptical about greater economic activity enduring in the face of clear growth impediments like hawkish central banks and ongoing supply chain restrictions like those seen during China’s lockdowns.”

The Nasdaq Composite was down 3.0 percent ahead of earnings releases from Alphabet, which owns Google, and Microsoft, which were also down considerably.

The Omicron flare-up in China has prompted officials to impose severe containment measures in the country’s major cities, cutting off millions of people and threatening to hit the world’s second-largest economy hard.

Hong Kong stocks edged up but made only a small dent in the massive losses suffered the day before, while Shanghai extended the previous day’s losses of more than five percent.

The sentiment was soothed somewhat after the People’s Bank of China vowed to boost growth and consumption.

China’s Covid measures have dealt a severe blow to its economy, leading to concerns about knock-on effects for the rest of the world — given its reliance on Chinese-made goods.

The China problem comes as traders contend with a hawkish Federal Reserve, which is fighting to keep inflation under control, which is at a more than 40-year high.

Policymakers at the US Federal Reserve have stated that they want to raise rates many times this year to keep a lid on inflation, with Fed Chairman Jerome Powell anticipating a half-point hike next month, followed by another before the end of the year.

Adding to the mix, the Ukraine conflict has wreaked havoc on the markets due to its impact on commodities prices and inflation.

Oil prices have regained some of their previous losses in recent days.

“Oil prices have rebounded modestly after yesterday’s sharp sell-off as investors look to balance how much of an effect a sharp slowdown in demand from China will have when set against the resilience of demand elsewhere, in relation to global inventories,” said CMC Markets’ Hewson.

– Key figures at 1530 GMT –
New York – Dow: DOWN 1.4 percent at 33,557.65 points

EURO STOXX 50: DOWN 1.0 percent at 3,721.36

London – FTSE 100: UP less than 0.1 percent at 7,386.19 (close)

Paris – CAC 40: DOWN 0.5 percent at 6,414.57 (close)

Frankfurt – DAX: DOWN 1.2 percent at 13,756.40 (close)

Tokyo – Nikkei 225: UP 0.4 percent at 26,700.11 (close)

Hong Kong – Hang Seng Index: UP 0.3 percent at 19,934.71 (close)

Shanghai – Composite: DOWN 1.4 percent at 2,886.43 (close)

Brent North Sea crude: UP 1.6 percent at $103.91 per barrel

West Texas Intermediate: UP 1.7 percent at $100.17 per barrel

Euro/dollar: DOWN at $1.0659 from $1.0713 late on Monday

Pound/dollar: DOWN at $1.2626 from $1.2741

Euro/pound: UP at 84.44 pence from 84.08 pence

Dollar/yen: DOWN at 127.37 yen from 128.14 yen