HONG KONG, July 12 (Reuters) – Global equities fell, oil fell and the euro moved closer to parity with the safe haven dollar on Tuesday as the prospect of a further tightening of central banks, the new outbreaks of COVID in China and energy shortages in Europe scared investors.
MSCI’s broader Asia-Pacific equities index outside Japan (.MIAPJ0000PUS) fell 1.3% to its lowest level in two years, while Japan’s Nikkei (.N225) went lose 2%.
Futures also pointed to an open week in the US and Europe, as US S&P 500 e-minis lost 0.6%, Nasdaq futures fell 0.7%, Euro Stoxx futures 50 of the entire region fell 0.8% and FTSE futures fell 0.44%.
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The euro fell to $ 1,0005 against the U.S. dollar, moving closer to parity for the first time since December 2002, as investors fear an energy crisis will plunge the region into a recession.
“The sense of risk elimination dominates global markets,” said Yuting Shao, macro strategist at State Street Global Markets.
“The dollar is the international benchmark reserve currency. So when there is a recessionary risk or there is a recovery in volatility, the green dollar is the currency that people rush to because it is the safest.” , Shao added.
The dollar index, which tracks the currency compared to six pairs, rose to 108.44, the highest since October 2002.
This week’s focus will be macro data, including US consumer inflation on Wednesday, and Federal Reserve officials ’comments as investors look for clues as to the outcome of the next Fed policy meeting before the officials enter the pre-meeting shutdown period.
A reading of high inflation would increase pressure for the Fed to increase its already aggressive pace of interest rate hikes.
Also on the list of investor concerns is the fact that a growing number of Chinese cities, including the Shanghai Mall, are taking new measures of COVID-19 starting this week to curb new infections after finding a subset of ‘Highly transmissible omicron. Read more
In the early afternoon, Hong Kong’s Hang Seng (.HSI) benchmark fell 1.21% to its lowest level since June 17, while the blue chip CSI300 (.CSI300) of mainland China lost 1.3%.
In addition, the rising cost of energy in Europe is a major fear, as the largest single gas pipeline carrying Russian natural gas to Germany went into annual maintenance, and flows are expected to stop during 10 days.
Investors are worried that the closure could be extended due to the war in Ukraine, further restrict the supply of European gas and cause a recession in the eurozone economy. Read more
The yield on 10-year benchmark Treasury bonds stood at 2.9595%, after falling below 3% overnight as investors bought Sheltered Treasury bonds in the middle of a sale on Wall Street.
Growth fears were also weighing on oil, despite concerns about scarce supply.
Brent crude oil futures fell $ 1.35, or 1.3%, to $ 105.75 a barrel, while US West Texas Intermediate crude traded at $ 102.64 a barrel, a $ 1.45 drop, or 1.4%.
Gold was slightly lower. Cash gold was traded at $ 1,728.98 per ounce.
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