Stocks finished sharply lower Tuesday, while the dollar slipped lower against its currency market peers and oil prices jumped, as investors reacted to some rare positive news on covid from China in hopes of finding a spark that could ignite global growth prospects into the second half of the year.
With central banks around the world essentially standing shoulder-to-shoulder in their inflation flight, vowing to lift interest rates and withdraw liquidity in order to blunt demand and tame consumer price increases, growth metrics have slowed and recession bets have increased.
China's move last night, however, to halve the amount of time inbound visitors must spend in quarantine, to seven days, suggests the world's second-largest economy may be finally prepared to awaken from its months-long slumber.
Set against data showing no new infections in both Shanghai and Beijing on Tuesday -- the first time that's happened since February -- and investors were more than happy to move out of risk-free assets such as Treasury bonds and the dollar in overnight trading.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% lower at $103.84 while benchmark 10-year note yields edged higher, to 3.228%, in New York trading against a 2.13% peg for 2-year notes.
Oil prices were also on the rise, buoyed by both bets on China demand and comments caught by a live microphone at the G-7 summit in Germany, where French President Emmanuel Macron told U.S. President Joe Biden that major producers such as Saudi Arabia and the United Arab Emirates could only make modest increases to their output capacity.
G-7 leaders also said they would look into ways in which they could ban cross-border shipments of Russian crude sold above a pre-set price as part of a broadening package on sanctions on Moscow linked to its war on Ukraine.
WTI futures for August delivery were marked $2.05 higher in New York at $111.60 per barrel while Brent contracts for the same month, the global pricing benchmark, jumped $2.77 to $117.90 per barrel.
Global stocks got a boost, with the Asia region MSCI ex-Japan benchmark rising 0.42% and Japan's Nikkei 225 gaining 0.66%. Europe's Stoxx 600 closed 0.27% higher in Frankfurt.
On Wall Street, however where the S&P 500 remains on pace for its worst first half start since 1970, the broadest benchmark of U.S. shares finished down 2.01% following a softer-than-expected reading of consumer confidence from the Conference Board and a big miss on manufacturing activity from the Richmond Fed.
"The persistent weakness in confidence surveys suggests a recessionary environment can become self-fulfilling," said John Lynch, Chief Investment Officer for Comerica Wealth Management.
"While cash on household balance sheets and two job openings for every job seeker are supportive of economic activity, inflation has pressured sentiment and can weigh on consumption and investment decisions," he added. "For equity investors, this has been reflected in the persistent leadership of defensives relative to cyclicals in the first half of the year."
The Dow Jones Industrial Average, meanwhile, finished down 491 points, or 1.56%, to 30,946 while the tech-focused Nasdaq fell 2.98%.
Morgan Stanley (MS) lead bank stocks higher in pre-market trading, pacing gains for Wall Street rivals such as Goldman Sachs (GS), Wells Fargo (WFC) and Bank of America (BAC), as the country's biggest lenders unveiled dividend hikes in the wake of the Federal Reserve's annual bank stress tests.
Walgreens Boots Alliance (WBA), a Dow component, moved nearly 3% lower after the drugstore and healthcare group abandoned plans to sell its U.K. business.
Nike (NKE) shares slumped 6.9% after the world's biggest sports apparel group cautioned the surging transport costs, as well as a strong U.S. dollar, would eat into profit margins over its coming financial year.
Playtika Holding (PLTK) shares tumbled 8.6% after Joffre Capital bought a minority stake the online casino gaming group.
TheStreet reporter Rob Lenihan contributed to this article.
