This post was originally published on this site
https://i-invdn-com.investing.com/trkd-images/LYNXNPEI3P036_L.jpg
MILAN (Reuters) – World shares steadied on Tuesday after a late revival on Wall Street, although global growth fears stoked by China’s COVID-19 curbs and fears of aggressive Fed tightening sapped risk appetite, lifting the dollar to new two-year highs.
The MSCI world equity index rose 0.1% from six-week lows by 0812 GMT, helped by a gain of 0.7% in Europe’s STOXX 600 index on strong earnings by companies such as bank UBS and shipping group Maersk.
However, China’s blue chip index fell another 0.8% after its worst day in two years on Monday, even as the central bank vowed to step up prudent monetary policy support, particularly for small firms hit by COVID-19.
Three-quarters of Beijing’s 22 million people lined up for COVID-19 tests as the Chinese capital raced to stamp out a nascent outbreak and avert the city-wide lockdown that debilitated Shanghai for a month.
News that Elon Musk had clinched a deal to buy Twitter (NYSE:TWTR) for $44 billion in cash buoyed tech stocks. Hong Kong’s tech sector rallied 2.3%, boosted by large firms such as Tencent and Alibaba (NYSE:BABA).
The nervousness about China’s economic slowdown hit Australian shares, with a drop of 2.1% in the benchmark index, hurt particularly by declines in miners.
U.S. stock futures fell slightly in European morning trade, pointing to losses of 0.6% for the Nasdaq and of 0.5% for the S&P 500 following strong late gains on Monday.
If the lockdown situation persists, it will affect China’s economy significantly, with an impact on global supply chains, said Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas (OTC:BNPQY).
Lockdown dragged into a fourth week in China’s financial hub of Shanghai, as authorities stick to a “dynamic zero-COVID” policy to combat the latest Omicron outbreak.
Markets have also been fretting that an aggressive pace of tightening by the U.S. Fed could derail the global economy, which has only just started to recover from the pandemic.
The Fed is expected to raise rates by a half a percentage point at each of its next two meetings. [FEDWATCH]
“It is unrealistic to think that the U.S. can raise interest rates in this way without looking at the real economy,” said Carlo Franchini, head of institutional clients at Banca Ifigest, adding that he was also worried about hawkish signals in Europe.
The European Central Bank’s Martins Kazaks joined a chorus of policymakers urging swift exit from stimulus, suggesting the bank should raise rates soon, and has room for up to three hikes this year.
“A rate hike right now would be madness … it would just squeeze demand further, reducing reduce consumption and drive the economy into stagflation, which in my view is a much more likely scenario than you might think,” Franchini added.
In currency markets, the dollar was in fine fettle on safe-haven demand. The dollar index against a basket of rivals rose to fresh two-year highs and was last up 0.2% at 101.9.
China’s offshore yuan fell 0.2% to 6.5832 per dollar, but stayed above Monday’s year-low of 6.609 after the People’s Bank of China said it would cut the amount of foreign exchange banks must hold as reserves.
Benchmark U.S. 10-year yields ticked up 1 basis point to 2.829% after retreating on Monday from hawkish Fed-induced highs, as the China lockdown and growth fears sent investors to the safety of U.S. bonds.
Oil prices sought to steady after the previous session’s sharp fall of 4%. Worries over China’s fuel demand were soothed by the central bank’s pledge to support an economy hit by renewed COVID-19 curbs.
Brent crude fell 0.05% to $102.27 per barrel, while U.S. crude dipped 0.2% to $98.33 a barrel. [O/R]
Spot gold fell 0.1% to $1,896 an ounce. [GOL/]
