World markets: Wall Street lowers stocks, crude stabilizes

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Prospects for a firm start on Wall Street helped European stocks recover from a new low for the year on Thursday, as investors weighed the risk that sharp interest rate hikes could tip economies in the recession.

Tech-laden Nasdaq futures rose 1%, while S&P500 futures gained 0.7%.

Stronger U.S. futures helped stocks in Europe reverse an earlier plunge to a 2022 low amid dismal economic data in Germany and France.
Crude oil also recouped earlier losses, but copper remained at a 16-month low as fears of a slowdown clouded the red metal.

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U.S. Treasury yields remained lower on Thursday after Federal Reserve Chairman Jerome Powell, in testimony before the U.S. Senate Banking Committee on Wednesday, underscored the central bank’s commitment to reducing inflation at all costs and recognized that a recession was “certainly a possibility”.

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“Powell said (money markets) are appropriately valued, which means we’re going to double the fed funds rate this year,” said Jeremy Schwartz, global chief investment officer at Wisdom Tree Investments.

“In this year, we thought you might be able to avoid (the recession) this year, but the data has definitely started to look a lot more negative,” Schwartz said.

In another sign of market caution, JPMorgan analysts said more investors are turning to cash, surpassing its previous peak in March 2020, when markets crashed due to COVID-19 lockdowns. 19.

Germany’s economy, Europe’s largest, suffered a sharp loss of momentum at the end of the second quarter, according to the latest Purchasing Managers’ Index, while corresponding figures for France also showed stronger activity. weak.

Bank UniCredit said the data, which sent eurozone bond yields tumbling, sounded alarm bells, suggesting growth momentum could weaken sooner and faster than expected.

Copper and crude oil prices fell on expectations of lower demand for fuel and building materials as consumers restrain spending.
“Copper has always been the leading indicator of economic growth,” said Patrick Spencer, vice president of equities at Baird Investment Bank.
The MSCI All-Country Share Index fell 0.14% off its low for the day, adding to its drop of more than 20% for the year.
“A downturn is coming and it’s really a matter of degree,” said Michael Hewson, chief market analyst at CMC Markets.

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Spencer said stock markets had been so damaged that they had already widely discounted a recession.
“If you look at the data, I think at worst what you’re looking at is maybe a mild recession. I believe the markets are in a bottoming process, and maybe you just have a another 5% down,” Spencer said.

FINTECH CHINA
Equities in Asia were mixed, with South Korea down 1.2% while China’s blue chips rose 1.7% and Japan’s Nikkei was flat.
Chinese tech stocks in Hong Kong rebounded sharply, up 2.8%, after Chinese President Xi Jinping chaired a high-level meeting that endorsed a plan for further development of major payment companies and the fintech sector.

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Worries about the outlook for demand undermined commodity prices, as oil fell Thursday to its lowest in more than a month.
Brent crude was down 0.3% at $111.46 a barrel and US crude was down 0.36% at $105.81 a barrel, both well off their lows for the day.
Iron ore was already at a six-month low, having lost more than 20% in recent weeks, while copper hit a 16-month low.

The yield on the benchmark 10-year Treasury note fell slightly to 3.1337%. The two-year yield, which rises on traders’ expectations of a hike in the fed funds rate, fell to 3.0398% from a US close of 3.056%.

In the foreign exchange markets, the dollar appreciated by 0.340% against a basket of major currencies. The index is up more than 8% this year, reflecting general risk aversion sentiment and the dollar’s yield advantage driven by the Fed.

Gold was slightly lower, with spot prices trading at $1,827 an ounce, down 0.5% on the day.

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