LONDON, November 21 (Reuters) – World stocks and oil prices fell on Monday as new COVID-19 restrictions in China raised concerns about the global economic outlook.
As the safe-haven dollar rallied, the U.S. Treasury yield curve was profoundly inverted, a sign that investors are alert to the risks of a global recession.
The coronavirus outbreaks across China are waning hopes for the easing of strict pandemic restrictions, partly due to a 10% drop in oil prices last week and a flat opening in European equities on Monday.
Beijing’s most populated area stay at home As the city’s COVID case numbers rose on Monday, at least one district in Guangzhou locked up for five days.
This sent major European stock markets downhill (.STOXX)S&P 500 futures and Nasdaq futures fell 0.5%, with markets in London, Frankfurt and Paris all opening weakly.
MSCI’s largest world stock index (.MIWD00000PUS) fell 0.5%.
While Thursday’s U.S. Thanksgiving holiday may trade weakly, coupled with the distraction of the football World Cup, Black Friday sales will give an idea of how consumers are doing and the outlook for retail stocks.
Fiona Cincotta, senior market analyst at City Index in London, said the feeling of risk aversion started the week.
“There is demand for safe havens like the dollar and riskier assets are in the background,” he said.
“The other thing we have to keep in mind is that we rally strong, so we need to evaluate where we are.”
The dollar was up 0.9% against the Japanese yen at 141.67, its highest level since November 1st. 11. The pound and the euro were both down 0.8%, slightly off their 18-week highs last week.
The Chinese yuan fell to a 10-day low against the dollar on Monday as worsening COVID-19 infection numbers and new mobility restrictions dampened market sentiment.
PRICED FOR RESSION
Atlanta Federal Reserve Chairman Raphael Bostic said on Saturday he is ready to raise interest rates by half a percentage point in December. underlined these rates will likely remain high for longer than the markets expect.
Bond markets suspect the Fed will tighten policy too much and plunge the economy into recession. The Treasury yield curve, measured by the difference between two- and 10-year bond yields, is around -70 basis points (bps), approaching the level last seen in 2000.
Two-year Treasury yields rose 3 basis points to 4.53% on the day, while 10-year Treasury yields rose 2 basis points to 3.84%.
At least four Fed officials are scheduled to speak this week ahead of President Jerome Powell’s speech on November 1. 30th December policy meeting, which will determine the outlook for rates.
Swedish and New Zealand central banks are expected to raise interest rates by 75 basis points this week.
While the speculative position has reversed in futures, the Fed chorus has helped stabilize the dollar after the last sharp sell-off. net short In currency for the first time since mid-2021.
“Given how much U.S. bond yields and the dollar have dropped over the past few weeks, we think they have a good chance of rebounding if Fed minutes are in line with members’ recent hawkish language,” Jonas Goltermann said. Senior market economist at Capital Economics.
Meanwhile, turmoil in cryptocurrencies He continued with the FTX exchange, which filed for US bankruptcy court protection and said it owed nearly $3.1 billion to its 50 largest creditors.
In commodity markets, gold was down 0.7% to $1,737 an ounce, after falling 1.2% last week.
Oil futures failed to find a footing after the steep drop last week that saw Brent crude drop nearly 9% in value.
Brent was last down 1% to $86.71, while US crude futures fell 0.5% to $79.71 a barrel.
Wayne Cole reported; Edited by Kenneth Maxwell
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