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World stocks slide as growth fears persist, safe-havens gain

Stock Markets May 19, 2022 05:20PM ET
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2/2 © Reuters. FILE PHOTO - An investor sits in front of a board showing stock information at a brokerage office in Beijing, China, December 7, 2018. REUTERS/Thomas Peter 2/2

By Herbert Lash

NEW YORK (Reuters) - Global equities fell further on Thursday, unable to sustain a late rally on Wall Street, as investors dumped stocks on fears of sluggish growth and bought safe-haven assets such as government debt and the Swiss franc.

Supply chain woes continued to fuel inflation and growth concerns as Cisco Systems Inc (NASDAQ:CSCO) warned of persistent component shortages, knocking its shares down 13.7%. The plunge made it the latest big name stock this week to post its largest decline in more than a decade.

Data showed factory output in the U.S. Mid-Atlantic region decelerated far more than expected in May with the business outlook for the six months ahead the weakest in more than 13 years, a regional Federal Reserve bank survey said.

Some megacap growth stocks that have underperformed this year posted gains but the rally fizzled. The Dow Jones Industrial Average fell 0.75%, the S&P 500 lost 0.58% and the Nasdaq Composite dropped 0.26%.

Big slides for Walmart (NYSE:WMT) on Tuesday and Target (NYSE:TGT) on Wednesday have demoralized investors who wonder about rising costs across the supply chain, said Michael James, managing director of equity trading at Wedbush Securities.

"You got a pretty severe shock to the system for portfolio managers with the combination of those two," James said. "That type of damage is hard to repair, piled on top of the extremely challenging year that technology investors have had," he said.

But James said there are those view market as being extremely oversold and "you're due for some kind of a bounce."

Traders are looking for a catalyst that will turn the market around as a near-term bottom approaches, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC.

But, "there's probably still enough fear among investors to see a few more downdrafts," he said.

Cash hoarding has reached the highest level since September 2001, indicating strong bearish sentiment, according to Louise Dudley, a portfolio manager at Federated Hermes (NYSE:FHI) Ltd.

Goldman Sachs (NYSE:GS) estimates a 35% probability of a U.S. recession in the next two years, while Morgan Stanley (NYSE:MS) sees a 25% chance of one in the next 12 months.

U.S. spot power and natural gas prices soared to their highest in over a year in some U.S. regions as Americans cranked up air conditioners during a spring heatwave.

MSCI's gauge of stocks across the globe fell 0.65% and the pan-European STOXX 600 index lost 1.37%.

The S&P 500 is down about 18% from its record close on Jan. 3, and MSCI's index has fallen the same since peaking on Jan. 4.

GRAPHIC: S&P 500 bear markets (https://fingfx.thomsonreuters.com/gfx/mkt/egpbkwmlgvq/Pasted%20image%201652990180837.png)

Germany's 10-year bond yield fell below 1% and U.S. Treasury yields fell as more soft U.S. economic data stirred worries the Federal Reserve's aggressive monetary tightening could hurt the global economy.

The yield on 10-year Treasury notes fell 3.8 basis points to 2.846%, after hitting a three-week low of 2.772%.

The dollar fell across the board, pulling back further from a two-decade high, as most other major currencies drew buyers.

The dollar index fell 0.896%, with the euro up 1.11% to $1.0582. The Japanese yen strengthened 0.35% to 127.79 per dollar.

The Swiss franc gained after Swiss National Bank president Thomas Jordan signaled on Wednesday the SNB was ready to act if inflation pressures continued.

GRAPHIC: Worst start to a year for world stocks (https://fingfx.thomsonreuters.com/gfx/mkt/byvrjdrjdve/Pasted%20image%201652952015101.png)

Central banks have been walking a tightrope, trying to regain control of decades-high inflation without causing painful recessions.

"We will have to discuss what we can do together in our respective areas of responsibility to avoid stagflation scenarios," German finance minister Christian Lindner said as he arrived for a two-day meeting of top central bankers near Bonn.

Oil prices rebounded from two days of losses in a volatile session, bolstered by weakness in the dollar and expectations that China could ease some lockdown restrictions that could boost demand.

U.S. crude futures rose $2.62 to settle at $112.21 a barrel. Brent settled up $2.93 at $112.04 a barrel.

U.S. gold futures settled up 1.4% at $1,841.20 an ounce, as a weaker dollar and Treasury yields burnished bullion's safe-haven appeal.

World stocks slide as growth fears persist, safe-havens gain
 

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Comments (9)
Milan Shukla
Milan Shukla May 19, 2022 7:47PM ET
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S&P will FART to 3200 by the time Sept rate hike kicks in and liquidity is sucked out with taper in 3 months
Samer Diab
Samer Diab May 19, 2022 11:50AM ET
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where is Mitchel pioneer?
Matt Kay
Matt Kay May 19, 2022 11:50AM ET
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I got you fam - stonk market is a manipulated joke and laughing stock of america. Hope it crashes by at least 75%.
Samer Diab
Samer Diab May 19, 2022 11:50AM ET
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Minh Vo
Minh Vo May 19, 2022 10:57AM ET
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Wall street the one who makes market crashes so all money goes to their pocket
First Last
First Last May 19, 2022 10:57AM ET
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Wall Street makes $ from taxpayer bailouts after crashes, sometimes caused by Republican incompetence or deregulation.  Before crashes, Wall Street makes $ from taking "risks" knowing bailouts will be there.  Wall Street also makes $ from Republican tax cuts.
Marco cuevas
Marco cuevas May 19, 2022 10:53AM ET
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Fed destroying people's retirements while people just keep burning through their savings to stave off inflation, which means older workers have to keep on working in this broken economy....AND THAT'S JUST HOW THEY WANT IT.
Ken Roth
Ken Roth May 19, 2022 9:10AM ET
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Also Shanghai and Beijing are major hub for production of components for western sales that cannot be delivered because they are all locked in their appartments instead of producing anything. You forget that china is the worlds production machine and if you take 300 million people out of production almost  equivalent to US population it will have a negative impact.
Ken Roth
Ken Roth May 19, 2022 9:09AM ET
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It is actually simple math that you would think people in this forum understands. Yes the oil prices were increasing before invasion at a slow pace but went balistic when russia invaded Ukraine because russia supplies 25% of EU Oil and gas and EU have talked about sanctioning russia oil and gas for very long since the invasion which have caused that energy prices have gone up very fast creating heavy costs for industries producing goods, which translate into higher i.e. higher prices at the gas station and also Ukraine stands for 30% of the world grain market which also have caused higher prices on food. The chinese zero covid policy have closed down consumption of approx. 300 million people who are looked in in shanghai and Beijing. all custormers of western products and effects growth possibilities
Darren Kirsch
Darren Kirsch May 19, 2022 9:09AM ET
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I agree.
Brad Albright
Brad Albright May 19, 2022 9:09AM ET
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Exactly.
John Martin
John Martin May 19, 2022 3:37AM ET
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Global growth fears 🤡🖕🏻
Ken Roth
Ken Roth May 19, 2022 12:55AM ET
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You can thank putin for his war in ukraine and china for the zero covid strategy this has created these downfalls. The interest rate hikes are reaktion to inflation that russia has created in the world
Clayton Erickson
Clayton Erickson May 19, 2022 12:55AM ET
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Uhhh... Wasn't inflation being documented well before putin moved troops to the border to begin with? He certainly didn't help the energy prices, but inflation was already prominent
James Johannsen
James Johannsen May 19, 2022 12:55AM ET
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right everyone puts blame on everything but the causes. The fed and political parasites caused this no one else
Ella Yassin
Ella Yassin May 19, 2022 12:55AM ET
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Sanctions, NWO & ego by... u know..
First Last
First Last May 19, 2022 12:55AM ET
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Clayton Erickson   Russia was holding back on energy sales months before troops invaded Ukraine en masse
William Smith
William Smith May 19, 2022 12:30AM ET
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There can be no growth with energy prices high everywhere and supplies low in many places thanks to misguided woke policies. Couple this with unimaginable debt and you have the makings of the next great depression.
Clayton Erickson
Clayton Erickson May 19, 2022 12:30AM ET
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Nothing happens until something moves. And moving by definition requires energy. As long as we hamstring production at all levels, inflation will be a problem.
First Last
First Last May 19, 2022 12:30AM ET
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Russia's invasion of Ukraine is NOT "woke policies"
 
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