Closing summary
Time to recap.
Global stocks are slumping as fears over high inflation and central bank tightening rock the markets.
The MSCI All-Country World Equity index has now down over 20% from its record closing high last November, on a day in which shares, bonds, commodities, most currencies and crypto assets all tumbled.
The US S&P 500 index is now down 3%, while in London the FTSE 100 index has shed 1.8% or 130 points to 7185.
The pound is under more pressures too, after the UK economy contracted unexpectedly in April. It’s now down over 1.5 cents at $1.215, the lowest since May 2020.
*U.S. STOCKS EXTEND FALL, S&P 500 DOWN 3.00 PCT
— lemasabachthani (@lemasabachthani) June 13, 2022
The oil price dipped, as a new Covid-19 outbreak in China raised fears of fresh lockdowns.
Eurozone government bond prices slid too, on concerns that the European Central Bank plans to start raising interest rates next month.
Craig Erlam of OANDA explains:
We all sensed the change in tone from ECB President Lagarde last week; the central bank is now extremely concerned about inflation and knows it needs to act urgently (by its own standards) and aggressively.
European stocks have been tumbling ever since while European yields have taken off again, with the Italian 10-year today hitting 4% for the first time since early 2014. Almost 10 years after Draghi’s famous “whatever it takes” speech, the ECB has a real job on its hands managing surging yields in the periphery
The US yield curve inverted - a sign that the US economy could be heading for recession.
The surge in US inflation to 40-year highs on Friday has unnerved investors.
As Kit Juckes of Société Générale puts it:
The US CPI data wasn’t that much worse than expected but the market was over-invested in the idea that inflation has peaked. We’re still seeing waves of price pressure crashing through the economy one after another, and while each wave may be ‘transitory’, they keep on coming and will do so until US demand has softened significantly.
The policy challenge is that the Fed has no idea how much monetary tightening is needed and will only find out it has done too much, long after the event. And we know what happens then.
There are widespread losses in crypto, with Bitcoin tumbling by 20% since Friday night, as cryptocurrency lending platform Celsius Network halted withdrawals because of “extreme market conditions”
Here are today’s main stories, first on GDP....
....the economy.....
And also:
Back in Europe, Italian and Spanish bond prices are sliding.
This has pushed the yield on Italian 10-year bonds hit 4% today for the first time since 2014.
The selloff somes after the European Central Bank ended its asset purchase stimulus programme, and said it planned to raise interest rates in July and September.
This does not look good. Italy's 10-year bond yield has today jumped to about 4%. Borrowing costs are increasing fast after the ECB's announcement of faster monetary tightening. pic.twitter.com/oIZBQeSbz7
— Philipp Heimberger (@heimbergecon) June 13, 2022
Spanish yield is going parabolic with the Italian. ECB says this is not a problem. To be seen. Spain 👇 pic.twitter.com/X0IPmFcBv6
— Gianluca (@MenthorQpro) June 13, 2022
