Dark red bags. The explosive mix of war, inflation and lockdown in China is plunging financial markets from Asia to the United States via Europe, The lists are closing at their lowest levels in the past two months thanks to the decline in oil which is putting pressure on energy. Wall Street is sinking. The Dow Jones lost 1.99% at 32,245.57 points, the Nasdaq was down 4.29% at 11,623.25 points, and the S&P 500 lost 3.21% at 3,993.26 points.
Piazza Afari closed down 2.74% with spread rising to 205 basis points while the yield on BTPs jumped to 3.22%, At November 2018 levels, the massive sell-off hitting stock markets is linked to the action of central banks, which have quickly begun to withdraw stimulus measures set in the pandemic in an effort to contain inflation, and investors who are hastily retreating in the face of signs of slowing growth.
What is worrying is the news coming out of China as the Covid lockdown is starting to affect the economy, causing the rest of the world to shiver. Chinese exports slowed significantly in April, rising by a modest 3.9%, marking the first single-digit growth in 18 months. Uncertainty related to the war in Ukraine and the effects of sanctions are adding to the slowdown in Beijing. The invasion accelerated the global price rush, prompting central banks to take decisive action against inflation at its highest levels in 40 years. To restore price stability, the Fed embarked on the steepest rate hike since 1980 accompanied by a rapid reduction in the balance sheet, which rose to $9 trillion with the pandemic. The pressure, the fear of economists and investors, risks sliding the US economy into recession, not yet fully recovering from the pandemic, or even worse, into stagflation. A complex picture in which uncertainty reigns, the biggest enemy of the stock exchanges. On Wall Street, it’s technology that pays the highest price. After a two-year run with Covid, Big Tech has not just brakes but nails. From Meta to Google, from Apple to Amazon, all the big giants have suffered huge losses. The Cupertino giant and Jeff Bezos lost 2.7%, Facebook 1.68% and Twitter 1.73%.
The decline in stock exchanges was accompanied by a drop in oil, with WTI and Brent losing 5%, and the collapse of Bitcoin. The cryptocurrency loses 9.7% and drops below $31,000.. Observers note that “with inflation concerns, many investors are taking a risk-reducing approach that includes selling cryptocurrencies and stocks.” For crypto skeptics, the drop shows that Bitcoin cannot be considered a safe asset: the digital currency has lost 29% this year compared to -10% in bonds, stocks and above all compared to +2.5% in gold, the safe haven asset par excellence.
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