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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Elon Musk ‘still committed’ to Twitter deal after putting it on hold – as it happened

TER Bitcoin Crypto United States Recession Inflation Jerome Powell Oil Economy NYSE
Elon Musk's Twitter profile on a smartphone.
Elon Musk's Twitter profile on a smartphone. Photograph: Dado Ruvić/Reuters

Closing Summary

Time to wrap up.

Elon Musk’s $44bn (£36bn) takeover of Twitter is in doubt after he put it “temporarily on hold”, citing concerns over the number of spam and fake accounts on the social media platform.

The Tesla chief tweeted on Friday morning that the deal was being frozen while he awaited details supporting Twitter’s assertion that fewer than 5% of its users were spam or fake accounts.

In a subsequent tweet, Musk said he was “still committed to acquisition” - but Twitter’s share price has still tumbled around 9% today since Wall Street opened.

Twitter’s shares are trading below $41 each, roughly a 25% discount to the $54.20 per share price Musk agreed to pay in mid-April.

That suggests investors do not believe a deal will happen anywhere near that price, and might not happen at all.

Here’s the full story:

Analysts speculated that the world’s richest man was about to walk away from the deal or seek a lower price.

Wedbush Securities analyst Dan Ives was highly critical of Musk’s move, saying the tweet sent the whole deal “into a circus show”.

Because now, the Street’s initial reaction is going to be, ‘he’s looking for a way to get out of this deal’.

The latest twist came at the end of a choppy week in the markets, which saw heavy losses among tech stocks and turmoil in the crypto world.

TerraUSD, the “algorithmic stablecoin” whose collapse prompted a multibillion-dollar selloff across crypto markets, has turned off its blockchain and been delisted from major exchanges, in effect shuttering the project for good.

However, the wider impact of the project’s failure appears to have been constrained. TerraUSD was once valued at more than $40bn (£33bn).

Shockwaves swept through cryptocurrency markets on Thursday as tether, the largest stablecoin and a foundational part of the digital asset ecosystem, broke its peg to the dollar. On Friday, however, tether was back to within a fraction of a per cent of its $1 peg and has successfully processed more than $3bn worth of withdrawals without issue.

Bitcoin is also recovering, up around 8% today at around $30,900, but could still post its worst run of weeky losses on record.

European markets have rebounded, with the FTSE 100 index of blue-chip shares up 172 points or 2.4% this afternoon.

In New York, the Nasdaq composite index has now jumped 3.3%, as technology stocks recover some of their losses:

But US consumer confidence has sunk to its lowest in a decade, as inflation hits America’s households.

Inflation is also causing pain in the UK, with warnings that the “golden era” of cheap food is coming to an end....

...although the era of multi-million pound pay packets for top executives is alive and well, with Tesco’s chief executive receiving £4.75m:

Have a lovely weekend. GW

Tesla is among the big risers on the S&P 500 today, with the electric car company’s stock jumping almost 6%.

Twitter is the top faller, though, down 9% this session.

Tesla’s shares have dropped by a quarter over the last month, as Musk sold some of his stock to help fund the Twitter deal, and used other shares as collateral for a loan.

Analyst Michael Hewson of CMC Markets explains:

Twitter shares have fallen sharply after Elon Musk said the takeover deal was on hold pending details supporting the calculation that spam or fake accounts represent less than 5% of total accounts. This appears to be fuelling concerns that Musk may be preparing the ground for backing out of the deal, although he will take a $1bn hit were he to do so.

The timing does seem curious given the lengths Musk has gone with respect to putting financing in place, after all why go to all that trouble securing secondary financing only to pull the plug at the last minute?

Of course, if Musk feels the deal doesn’t work for him then he will have to pay a $1bn break clause which will probably sting a bit, but he’ll probably view it as a cheap cut, especially since Musk made his bid for Twitter, Tesla shares have fallen over 20%. This fall in value potentially cuts his wriggle room in funding the deal from the value of his Tesla shares.

Tesla shares, on the other hand, are on the up, perhaps on the prospect that a deal has become less likely, or that the deal price might get negotiated down.

Updated

Elon Musk sowed new chaos into the market today by putting his takeover bid for Twitter on hold, explains Bloomberg:

But they point out that doubts had already been swirling about the deal:

Doubts have grown in recent days that Musk would be able to pull off his acquisition of Twitter, and that the entrepreneur may consider dropping his bidding price for the micro-blogging site. The whole transaction has been a frenzied and untraditional affair, largely played out on Twitter.

Musk went from being “just” a prolific user to revealing a more than 9% stake in the company and then launching an unsolicited takeover offer -- without detailed financing plans -- within a matter of weeks. It all came together at breakneck speed in part because Musk waived the chance to look at Twitter’s finances beyond what was publicly available.

And on Musk’s concerns about spam accounts...the calculation that less than 5% of accounts are fake has been used by Twitter for close to a decade.

Bloomberg adds:

The proposed takeover includes a $1 billion breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funding as promised. It is unclear whether an update by Twitter on the number of fake accounts -- if materially larger than 5% -- would trigger a so-called material adverse effect clause, releasing Musk from the breakup fee.

More here.

Some snap reaction to the slide in US consumer confidence:

US consumer sentiment weakest since 2011

US consumer confidence has taken another hefty knock this month, as inflation hits households.

The University of Michigan’s index of consumer sentiment has declined by 9.4% from April, reversing last month’s gains, to hit its lowest since 2011.

It dropped to just 59.1 for this month, compared with 82.9 a year ago before price started their steep climb.

The report says people haven’t been this downbeat on their financial situation in almost a decade, with inflation hitting confidence.

These declines were broad based--for current economic conditions as well as consumer expectations, and visible across income, age, education, geography, and political affiliation--continuing the general downward trend in sentiment over the past year.

Consumers’ assessment of their current financial situation relative to a year ago is at its lowest reading since 2013, with 36% of consumers attributing their negative assessment to inflation. Buying conditions for durables reached its lowest reading since the question began appearing on the monthly surveys in 1978, again primarily due to high prices.

US consumer confidence index
US consumer confidence index Photograph: University of Michigan

Twitter shares slide 10%

Shares in Twitter have tumbled 10% in early trading.

They’ve dropped to $40.32, from $45 last night, on concerns that Elon Musk will walk away from the takeover, or attempt to renegotiate the price.

That widens the spread to Musk’s agreed offer of $54.20 -- which shows a greater probability that it won’t happen, at least at that price:

Wall Street has opened higher, on the final session of a turbulent week in which worries about slowing growth and rising interest rates hit stocks.

The S&P 500 index has jumped 1.4%, or 55 points, to 3,985 points, pulling away from bear market territory.

Consumer discretionary stocks, technology and energy are the top performing sectors.

Away from the Twitter deal, new bank lending in China has hit the weakest in nearly four and half years in April.

It suggests demand for credit from businesses and households weakened as new Covid-19 lockdowns were brought, weakening the economy.

Chinese banks extended 645.4 billion yuan ($95.14 billion) in new yuan loans in April, down about 80% from March and dipping to the lowest level since December 2017, according to the People’s Bank of China data, which missed forecasts.

Capital Economics said in a note.

“Lending was much weaker than expected last month as lockdowns weighed on credit demand. This should nudge the PBOC to announce further easing measures soon.

But the central bank continues to signal a relatively restrained approach.”

The US stock markets is set to rally, after a very turbulent week that saw tech stocks tumble hard:

Twitter’s share price has recovered some of its earlier losses.

It’s currently down around 11% in pre-market trading, at $40, having dropped as low as $34 when Musk said the deal was on hold, from $45 last night.

Of course, we’ve now got a good idea of what Twitter would be worth without Musk’s $54.20/share bid...

Musk: Still committed to acquisition

Elon Musk has now tweeted that he’s “Still committed” to the acquisition....

Updated

Full story: Twitter takeover temporarily on hold, says Elon Musk

Elon Musk has said his $44bn takeover of Twitter is “temporarily on hold” after the social media platform claimed that less than 5% of its users were spam or fake accounts.

The Tesla chief tweeted on Friday morning that the deal was being frozen while he awaited details behind Twitter’s assertion.

Musk announced the move alongside a link to a Reuters article published on 2 May that referred to a filing with the US financial regulator, in which Twitter claimed that false or spam accounts represented less than 5% of its daily average users.

Musk has railed at automated Twitter accounts – which are not run manually – and said after announcing the takeover that he wanted to improve the platform by “authenticating all humans”. He has agreed to pay a $1bn break fee to Twitter if he walks away from the deal.

The news sent Twitter’s shares down about 23% in pre-market trading, on concerns that the deal could collapse.

More analysis from Wedbush’s Dan Ives:

Under the deal, Elon Musk and Twitter each agreed to pay the other $1bn if their proposed merger falls apart because of the actions of either side.

Updated

Mirabaud: the Twitter tragi-comedy continues

The whole situation is ‘farcical’, and Twitter’s board must take some of the blame.

So explains Neil Campling, head of TMT research at Mirabaud Equity Research:

“The tragi-comedy continues and the Twitter situation is nothing short of laughable. We’d always said Musk may cut or run or change his tune at the 11th hour and 59 minutes and 59 seconds on the clock. We’re not even close to the 11th hour yet. Farcical.

Musk has never had the full funding – we know that from his constant attempts to get financial support – but he also held all the cards. The Twitter board have been held hostage and only have themselves to blame for this mess. No other buyer will emerge – if Musk decides he is still interested he can “name his price”… and it won’t be higher!

The board should have seen this coming. There was a specific performance clause in the merger agreement (section 9.9), which gave Twitter the right to “consummate the closing (of the deal)” but only if Musk had the financing – which, of course, he doesn’t.”

Elon Musk may be having second thoughts about the deal, says John Colley, Associate Dean at Warwick Business School:

‘Fake accounts’ were always a likely issue, but didn’t dissuade him from launching his bid. Bringing it up now may just be an excuse to withdraw gracefully.

“Maybe the true cost and extent of the risk involved in turning around a ‘break even’ Twitter may have dawned on Elon Musk. After all, $43Bn for what may be little more than a sideline does seem excessive. The collapse in Tesla’s shares following the original offer announcement underlines what the markets think.”

Musk’s move will be ‘highly frustrating’ for many at Twitter, says Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

‘’Musk’s Twitter takeover was always destined to be a bumpy ride, and now it risks hitting the skids over the number of fake accounts on the platform. Twitter’s share price plunged by around 18% in pre-market trading following his tweet indicating the deal was temporarily on hold.

He is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site.

This is likely to come as highly frustrating for many in the company given that a number of senior executives have already been laid off in expectation of the takeover and the change in direction he was expected to pursue.

Twitter’s head of consumer product, Kayvon Beykpour, and head of revenue, Bruce Falck are among the departures.

Beykpour, who joined when Twitter bought his Periscope live video service, learned he was leaving while on paternity leave.

Also, what’s Musk’s real motive, Streeter adds:

There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover.

The $44bn price tag is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.’’

"This is a full on Friday the 13th circus show"

Wedbush Securities analyst Dan Ives says it’s “a full on Friday the 13th circus show”.

Speaking to CNBC’s SquawkBox show as news broke that the deal was on hold, Ives called Musk’s move ‘a shocker’.

He explained it’s not OK to simply put a deal on hold with a tweet. You’d expect a regulatory filing with a deal of this type, or something else more formal.

Ives explains.

To come out in a tweet, it sends this whole thing into a circus show.

Because now, the Street’s initial reaction is going to be, ‘he’s looking for a way to get out of this deal’.

Ives points to the big fall in Tesla’s share price (down a quarter in the last month). The deal’s finances included a margin loan secured against some of Musk’s Tesla shares.

Ives also points out that Twitter’s filing, stating false or spam accounts represented fewer than 5% of daily users, came out on May 2nd, so isn’t a sudden development.

Parmy Olson of Bloomberg Opinion has a good take too:

Could Musk be looking for a way out of the Twitter deal, given recent market turmoil, or possibly to reprice it?

Tech stocks have slumped since he revealed his stake in Twitter at the start of April, so that $44bn offer could now look too high.

New York Times financial editor Anupreeta Das points out that Twitter’s shares never reached Musk’s offer, reflecting doubts about the deal:

Elon Musk says Twitter deal is on hold until he gets more information about fake accounts

Just in: Elon Musk’s $44bn deal to buy Twitter is “temporarily on hold” until he gets more information about fake accounts on the platform.

The billionaire has tweeted that the deal is on hold, waiting for details supporting the calculation that fake and spam accounts represent less than 5% of the users on its platform, as Twitter said in a filing earlier this month.

Musk linked to a Reuters report from May 2, which said Twitter estimated that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter.

The news has sent Twitter’s shares plunging around 23% in pre-market trading, on concerns that the deal could collapse.

They’ve on track to open at $34.60, down from around $45 last night, and away from Musk’s agreed offer of $54.20.

Musk has previously said that one of his priorities once he bought Twitter would be to remove “spam bots” from the platform.

But he also warned earlier this week that the deal would take at least another two months to complate, and was “not a done deal.”

That takeover has already led Twitter to announce a hiring freeze, and the departure of two top leaders in a major shakeup.

Updated

Eurozone industrial production declines as Ukraine war takes toll

Factory output across the eurozone fell in March, as rising input prices and supply chain disruption due to the Ukraine war hit the sector.

Industrial output from factories, mines and utilities across the region declined by 1.8% in March - the first full month of the conflict - compared with February, and were 0.8% lower than a year ago.

Production of capital goods fell 2.7%, suggesting demand for heavy duty machinery, equipment, vehicles and tools declined as economic uncertainty rose.

Production of non-durable consumer goods declined 2.3%, while intermediate goods (used to make goods for sale) dropped 2.0%, and energy fell 1.7%. But production of durable consumer goods rose 0.8%.

Germany saw one of the largest monthly declines, with production down 5%, along with Slovakia (-5.3%) and Luxembourg (-3.9%), while the highest increases were observed in Lithuania (+11.3%), Estonia (+5.1%), Bulgaria and Greece (both +5.0%).

‘Golden era’ of cheap food is ending, says ex-Sainsbury’s boss

The UK’s “golden era” of cheap food is coming to an end, the former Sainsbury’s boss Justin King has warned, saying households should be prepared for higher grocery bills in the long term.

King claimed supermarkets could not be expected to absorb the extra costs entirely or protect consumers from rising prices, despite having announced higher earnings, as their net profit margins are only around 3%.

Instead, shoppers must making hard choices on how they spend their money, particularly as soaring inflation – made worse by the ripple effects of the war in Ukraine – pushed up prices on supermarket shelves.

King told BBC Radio 4’s Today programme

“We have been perhaps through a golden era. We spend much less as a proportion on average of our household budgets on food than we had almost any time in history, and that’s been [on] a long, gentle decline. So I suspect what we will see is a higher proportion, across the piece, spent on food for the longer term.

“It won’t actually be that high in historical terms but it will require adjustments in terms of how we all prioritise our family budget spending,” King added.

Here’s the full story:

Jacob Rees-Mogg’s call for higher UK interest rates comes amid growing irritation, and worse, against the Bank of England over its performance.

Conservative MPs are blaming the BoE for failing to get a grip on inflation, creating the cost of living crisis (for which the government has few answers, critics say)

Some argue the Bank should not have waited until last December to start lifting interest rates, as the FT explains:

Liam Fox, a former cabinet minister, told the Commons that the BoE had “consistently underestimated the threat” of rising inflation, which the BoE fears could top 10 per cent later this year.

“The BoE persisted beyond any rational interpretation of the data to tell us that inflation was transient, then that it would peak at 5 per cent,” he said. Fox said the Commons Treasury select committee should launch an investigation into the central bank’s handling of inflation.

His comments reflect growing anger on the Tory benches towards the BoE. One member of the government said that the BoE had “got it completely wrong at every single moment of this crisis” and it should have “obviously” tightened monetary policy sooner.

Rees-Mogg calls for higher interest rates

Britain’s Brexit Opportunities and Government Efficiency Secretary Jacob Rees-Mogg this week
Britain’s Brexit Opportunities and Government Efficiency Secretary Jacob Rees-Mogg this week Photograph: Oli Scarff/AP

Brexit minister Jacob Rees-Mogg has urged the Bank of England to hike interest rates, and rejected calls for an emergency budget to help struggling households.

Speaking to Times Radio, Rees-Mogg said ‘tighter monetary policy’, ie higher borrowing costs, would help cool inflation, which could hit 10% by the end of the year.

But he pushed back against helping people now through higher spending, even through calls for more assistance grow daily.

Rees-Mogg said:

“The right responses are tighter monetary policy, which is the responsibility of the Bank of England, and constrained fiscal policy.

An emergency budget is not likely to be an answer to this. What is going to be an answer are essentially long-term measures combined with the immediate help that’s been given to people who are particularly affected.”

But...‘Long-term measures’ don’t help people who simply don’t have the money to pay surging energy bills and rising food costs, though, which is why the boss of John Lewis yesterday called for a financial support package.

The Bank of England is itself split over how fast to tighten policy. It raised interest rates to 1% last week, but three of the nine policymakers on the MPC wanted a bigger jump to 1.25%.

The committee is also divided about much further tightening will be needed, as it tries to balance pressures from inflation and slowing growth.

Rees-Mogg, meanwhile, told GB News that increased public spending would fuel inflation:

“The problem with spending more money is you make the inflationary problem worse rather than better.

This is very difficult for politicians because with a cost of living problem there aren’t easy popular things to do, and if you do those you make the problem worse.”

But, a fiscal tightening at a time when the economy is alreading slowing, increases the risks of a downturn.... and sounds like a return to the economic policies of the 1980s...

The US stock market has borne the brunt of this week’s turbulence, due to the tumble in technology giants.

The Nasdaq Composite has shed 6% so far this week, while the UK’s FTSE is currently down less than 1% for the week, and Germany’s DAX is actually over 1% higher.

So far this year, the Nasdaq Composite has lost 28% -- as investors turned cold on fast-growing tech stocks which had previously enjoyed generous valuations based on their future prospects, not their current profits.

The Financial Times’s Richard Waters has calculated that the five biggest tech companies have shed nearly $2.6tn in value since the start of the year, a 26% drop.

But the axe is hanging ominously over smaller, high-growth tech companies, he adds:

This is where valuations became most stretched, and where the market is having most trouble finding its nadir. As investors grope for more appropriate financial yardsticks with which to judge these companies, as well as the right valuation multiples to apply to those metrics, volatility is likely to remain high.

Multiples of revenues were a favourite that growth investors used to chase stocks higher, at least until the turn that set in last November. On this measure, there is ample room for further declines, particularly since markets often overshoot on the way down as well as on the way up.

Here’s the full piece: Reasons why the tech stock crash may be far from over

And here’s a reminder of just how sharply tech stocks have fallen:

Molten copper flows into molds at a smelting plant of Wuzhou Jinsheng Copper Co Ltd.
Molten copper flows into molds at a smelting plant of Wuzhou Jinsheng Copper Co Ltd. Photograph: VCG/Getty Images

Recession fears have also hurt copper, seen as a good measure of the health of the global economy.

Copper is trading around a seven-month low in London today, at around $9,051 per tonne.

That puts copper on track for its sixth weekly fall in a row, due to fears that a global economic slowdown will hit demand.

Cryptocurrency prices are recovering some ground this morning.

Bitcoin (still over $30,000) and Etherium are both up around 9% over the last 24 hours, but that only recovers a little of this week’s heavy losses.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says the dust seems to be settling in cryptocurrencies.

Terra and Luna are now worth almost nothing and probably won’t regain the investors’ confidence, and Tether, another stable coin had a mini crash to 0.95, BUT it recovered fast before things got serious, and Bitcoin returned past the $30K, which is a sign that the confidence in the broader sector may have not been damaged as much as we first feared.

This being said, the crypto investors will certainly be pickier in selecting their holdings from now on, as the Terra incident comes as a warning that the cryptocurrencies can crash as fast as they emerge.

Gold Bullion from the American Precious Metals Exchange.
Gold Bullion from the American Precious Metals Exchange. Photograph: Mike Segar/Reuters

It’s also been a rough week for gold, which hit its lowest level since February.

Spot gold has dropped around 3% this week, and is trading around $1,826 per ounce, on track for its fourth weekly drop in a row.

Gold is often pitched as a hedge against inflation, and market volatility, so you might have expected a rally. However, gold’s lack of a yield can count against it -- the rise in short-term interest rates and bond yields mean there are better opportunities to make (or lose!) money.

Also, the surge in the US dollar to a 20-year high has hit prices of assets priced in dollars.

Craig Erlam of OANDA says:

The yellow metal has well and truly fallen out of favour recently, despite the risk environment being primed for safe-haven assets.

It’s easy to forget though that the price is already extremely high and interest rates are rising at the most aggressive rate in decades. And that could accelerate further if the inflation data doesn’t improve.

Imported iron ore being unloaded from a ship at a port in Lianyungang, Jiangsu Province of China.
Imported iron ore being unloaded from a ship at a port in Lianyungang, Jiangsu Province of China. Photograph: VCG/Getty Images

Iron ore prices are heading for its biggest weekly drop since mid-February, as China’s Covid-19 restrictions hit demand.

The steel-making ingredient was steady near $126 a ton in Singapore on Friday and is down around 9% this week, according to Bloomberg data.

The lockdown in Shanghai, and curbs in other cities, is hitting demand for steel -- while the wider global slowdown could also weigh on factory activity.

Bloomberg explains:

Iron ore has fallen around a quarter from this year’s peak in early March as the virus restrictions spread. The lockdowns are making it hard for the government to deploy infrastructure spending, and are occurring at a time of year when construction typically ramps up after winter.

“China’s virus-related restrictions are weakening the impact of support measures during the peak construction season and property indicators are down,” Australia & New Zealand Banking Group Ltd. analysts including Daniel Hynes said in a note. “Steel production could increase, though looming control measures are a downside risk.”

Concerns about China’s property sector rose this week too, after developer Sunac China missed a bond repayment.

Reuters: Bitcoin set for record losing streak as 'stablecoin' collapse crushes crypto

Cryptocurrencies nursed large losses on Friday, with bitcoin trading near $30,000 and set for a record losing streak as the collapse of TerraUSD, a so-called stablecoin, rippled through markets, Reuters reports.

Crypto assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. Sentiment is particularly fragile, as tokens supposed to be pegged to the dollar have faltered.

Bitcoin the largest cryptocurrency by total market value, managed to bounce in the Asia session and traded at $30,300, up 5%. It has staged something of a recovery from a 16-month low of around $25,400 reached on Thursday.

But it remains far below week-ago levels of around $40,000 and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.

“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund. More here.

The bitcoin price in a candlestick chart, showing the losses in the last seven weeks
The bitcoin price in a candlestick chart, showing the losses in the last seven weeks Photograph: Refinitiv

European markets open higher

There’s some relief in the European markets this morning, with stocks opening higher after a choppy week.

In the City, the FTSE 100 index is up 71 points, or 1%, led by online grocery business Ocado - up 5% (but still down 50% so far this year).

Financial stocks are also rallying, with Standard Chartered (+3.2%) and Prudential (+2.8%) in the risers.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says:

‘’Investors are continuing to wrestling with worries over inflation as the oil price climbs back up again and supply concerns resurface amid ongoing geo-political tensions.

As the era of cheap money has hurtled to an end, lowering liquidity in the markets, trading in the sessions ahead is set to stay volatile. On Wall Street the S&P 500 was just a whisker away from a bear market before rebounding and the growls are continuing at the spectre of stagflation hovering over economies.

Introduction: Markets on edge after volatile week

Traders work on the floor of the NYSE in New York last night
Traders work on the floor of the NYSE in New York last night Photograph: Brendan McDermid/Reuters

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

It’s been a bruising, and confusing, week in the markets. Volatiltiy has spiked, triggered by growing signs that the world economy is slowing, and fears of recessions in some major economies including the UK.

Wall Street is on track for its worst week since early January, with the S&P 500 index having lost over 4.7% since Monday morning (although there’s still time for a recovery, or another jolting fall, today).

That would be the S&P 500’s sixth weekly loss in a row, the worst streak of weekly losses since 2011, when it also fell for six weeks running amid the eurozone debt crisis.

Last night, the S&P 500 fell to the brink of a bear market, as fears over the health of the global economy, high inflation, rising interest rates and supply chain disruptions hit assets.

The S&P 500 index this y ear
The S&P 500 index this year Photograph: Refinitiv

Jim Reid, market strategist at Deutsche Bank,says there has been some “incredible intraday volatility” across a range of asset classes.

At one point in the New York afternoon, the S&P 500 had been down -1.94% at the lows, which left it just shy of a -20% decline since its all-time closing peak that would mark the formal start of a bear market.

But then in the final hour there was a major recovery that meant the index only saw a modest -0.13% fall on the day, even if that still marked a fresh one-year low. Futures markets are implying we’re going to see that rally extended today, with those for the S&P up +0.92% this morning.

But even if we do see a recovery of that sort of magnitude, then the major losses we’ve already seen this week mean it would still be the first time in over a decade that the index has posted 6 consecutive weekly declines.

The turmoil in the crypto market has also added to tensions in the wider markets. The meltdown of TerraUSD this week, and the luna coin linked to it, showed the risks of stablecoins which claim to be fixed to a certain asset.

Panic deepened yesterday as another major stablecoin, Tether, failed to maintain its link with the US dollar. Tether (which is meant to be pegged at $1), dropped as low as 95 cents... and although it has recovered, it’s not yet recovered that $1 peg.

Ratings group Fitch said the troubles at Tether and TerraUSD “highlight the fragile nature of private stablecoins, and will accelerate calls for regulation”.

The wobble sent Bitcoin reeling to 16-month lows towards $25,000 las night -- although it has bounced back to $30,000 this morning. Reuters reports that bitcoin is headed for a record seventh consecutive weekly loss.

Investors are also fretting that the US economy could suffer a ‘hard landing’, as interest rates are raised sharply.

Overnight, Federal Reserve Chair Jerome Powell warned that a ‘soft landing’ could be out of his control.

Powell told NPR’s “Marketplace” that high inflation and economic problems beyond the US could thwart his efforts to cool prices without causing a recession.

“The question whether we can execute a soft landing or not — it may actually depend on factors that we don’t control.

There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so.”

Powell also signalled the Fed willpush ahead with 50bp hikes at the June and July meetings. And he warned that bringing inflation down to target will “also include some pain”, but it would be more painful if inflation got entrenched.

The agenda

  • 10am BST: Eurozone industrial production report for March
  • 3pm BST: University of Michigan’s survey of US consumer sentiment
  • 5pm BST: Russian
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Mouth-taping, TikTok’s latest trend, won’t give you a ‘snatched’ jaw. Here’s what it might do
IN FOCUS: As the trend of taping one’s lips closed at night goes viral, Inga Parkel speaks to experts about whether the practice actually has any aesthetic benefits – or if it’s yet another online sensation best to brush off
The Independent UK
The Independent UK
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