Fears of a recession have gripped countries worldwide. In a recent report, Nomura Holdings said that several major economies are set to enter recession over the next 12 months. Bearish government policies and spiraling living costs have thrown the global economy into a synchronized growth slowdown.
Along with the US, Nomura anticipates that Europe, Japan, the UK, Canada, South Korea, and Australia would also enter the recession camp. As many as seven central banks across the world have opted for tighter rates to control rising prices to shield their economies from the repercussions of the ongoing Russia-Ukraine war.
Britain is in the midst of nationwide strikes — affecting in particular the transport sector — as wages are eroded by rocketing inflation.
Later, Wall Street stocks also pushed higher than Fed policymakers reiterated their willingness to continue raising interest rates to tamp down price pressures in minutes recounting the central bank’s big interest rate hike in June.
Market watchers said investors were pleased to see the tough line on inflation, although Briefing.com analyst Patrick O’Hare noted the Fed’s stance was a restatement of its posture in recent statements.
Meanwhile, the euro hit a fresh 20-year low point under $1.02 — the European single currency fast closing in on parity with the dollar as traders eye recession for the eurozone and the ECB’s slower moves to raise interest rates than the US Fed.
Markets around the globe faced the heat as the possibility of a recession looms large. The S&P 500 fell 1.8 percent as of 10:10 a.m. Eastern. More than 95 percent of stocks in the benchmark index fell in the weak opening following a long weekend for the Independence Day holiday. The Dow Jones Industrial Average fell 615 points, or 2 percent, to 30,515 and the Nasdaq fell 1.3 percent.
Small-company stocks also fell. The Russell 2000 shed 1.9 percent.
Energy companies had some of the biggest losses, with Exxon Mobil shedding 2.8%.
Banks also fell significantly, along with bond yields. The yield on the 10-year Treasury, which helps set mortgage rates, fell to 2.82 percent from 2.90 percent on July 1. JPMorgan Chase fell 2.4%.
In Tokyo, shares of commodities trading firms Mitsui & Co and Mitsubishi Corp dropped more than 5% after former Russian president Dmitry Medvedev threatened oil and gas supply cuts to Japan.
Sterling was also pinned by a two-year low and not helped by the latest political crisis to hit Prime Minister Boris Johnson’s government, with the resignation of his finance and health secretaries questioning his longevity as leader.
After touching $1.1899 overnight the currency steadied at $1.1964 in Asia.
A change in leader, or speculation about it, could lend support but it is weighed heavily by an economic outlook that a new leader is unlikely to shift.
The surge in inflation has been caused by soaring energy costs and rising post-lockdown demand, but observers said concerns about a contraction — along with signs that consumers were being put off by high prices — were weighing on the oil market.
Both main contracts were down more than one percent Thursday and have fallen about 10 percent this month. They are now below $100 for the first time since April.
Data on Wednesday showed US demand appeared to be waning as stockpiles rose, confounding expectations for a drop, while there are also some concerns that the China outbreaks — including another spike in Shanghai — could see major cities put into lockdown again.
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