Global Stocks, Oil Tumble As Dollar Surges And Familiar Fears Return

Was the Wednesday post-election rally a one-hit wonder? Was the FOMC, despite its surprisingly sparse statement, superhawkish? Was nothing actually fixed this week (narrator: "it wasn't") and are all the "same old" fears - trade wars, interest rates, China, tighter financial conditions, peak earnings, slowing global economy - haunting the market making a comeback?

Those are questions on traders' minds this morning as global markets were headed for their biggest drop in two weeks, awash in a sea of red, as the MSCI World index fell half a percent, its biggest drop since Oct. 26 ...

... as Brent tumbles below $70/barrel to a 6 month low, while WTI is now 21% below its recent high and has entered a bear market, now down for a record 10th consecutive day in a row...

... and as the dollar surge brings it just shy of the 2018 highs as the yuan resumed weakening on growing concerns about a slowdown in China, despite inflation data out of Beijing overnight that came in as expected.

While the Fed's decision to hold rates was expected, some traders had expected an even more dovish approach and a mention of the October rout; its absence led to an overly hawkish take with the Fed confirming a December increase is a distinct possibility for the robust US economy. That contrasts sharply with China, where cooling producer price inflation and falling car sales suggested an economy struggling to gain traction.

“Worries about trade wars and how the slowdown in China will impact the rest of the world mean stocks appear to be more risky, so there’s a typical risk-off move in markets today,” said DZ Bank rates strategist Pascal Segesser.

And as "plain vanilla" growth risks return now that the election is gone, stocks in Hong Kong and China were the main losers in Asia, where a financial sector sub-index fell more than 2 percent after China’s banking watchdog told lenders to allocate at least a third of new loans to private companies, raising the prospects of a jump in bad assets.  Additionally, a decline in Chinese PPI, weak car sales and a disappointing outlook from a top online travel company combined to reignite lingering concerns about the health of the world’s second-biggest economy as BBG notes. As as result, the Shanghai Composite, a barometer for overall risk sentiment outside the US, continued to slide, and was down 1.4%, closing just below 2,600, its lowest level since the end of September.

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