Global stock markets fall sharply over China lockdown fears

·Business Reporter, Yahoo Finance UK
·3 min read

 

European stock markets fell as surging inflation, slowing economic growth and lockdowns in China offset relief about French president Emmanuel Macron's election victory. Photo: Kevin Frayer/Getty
European stock markets fell as surging inflation, slowing economic growth and lockdowns in China offset relief about French president Emmanuel Macron's election victory. Photo: Kevin Frayer/Getty

European stock markets took their cue from Asia on Monday, tumbling into the red as surging inflation, slowing economic growth and lockdowns in China offset relief about French president Emmanuel Macron's election victory.

The FTSE 100 (^FTSE) fell 1.5% to its lowest since 18 March as markets closed in Europe, with 96% of its constituents in the red. Energy, mining and commodity stocks were the biggest drag on the index.

The CAC (^FCHI) tumbled 1.9% in Paris, and the DAX (^GDAXI) finished 1.4% lower.

It came as Emmanuel Macron is set to be re-elected as French president for a second term, after defeating far-right Marine Le Pen in Sunday’s second round vote.

Projections suggest Macron won around 58% of the vote compared with Le Pen’s 42%, however, she managed to secure her best score ever.

“Despite some political relief in Europe after Macron’s victory, European markets have been overshadowed by broader macro concerns opening under pressure and taking their cues from the sharp sell-off on Wall Street on Friday and in China overnight,” said Victoria Scholar, head of investment at Interactive Investor.

“The FTSE 100 has broken below support at 7,400 with China sensitive stocks in the mining sector like Glencore (GLEN.L), Anglo American (AAL.L), Rio Tinto (RIO.L) leading the leg lower.”

Across the pond, the S&P 500 (^GSPC) dipped 1.2% and the tech-heavy Nasdaq (^IXIC) fell 0.4%. The Dow Jones (^DJI) edged 0.9% as Wall Street entered midday trading.

Read more: Pound hits 18-month low against the dollar

That follows its worst session since early in the pandemic on Friday, when the Dow lost 981 points. The negative mood comes as the US Federal Reserve prepares to lift interest rates to tackle runaway inflation.

Last week, Fed chair Jerome Powell said it was “absolutely essential” to tame inflation, and that the central bank could lift interest rates by 50 basis points in May.

"Super-hot inflation is settling like an ominous heat cloud over the world’s largest economy, and although a succession of steeper interest rate hikes might blast cold air onto demand, the worry is that the policy could blow up into a recession, which would have knock on effects around the world," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Meanwhile, Asian markets sank on Monday while oil was hit by expectations that Chinese demand will dry up due to COVID lockdowns in the country.

Chinese stocks suffered their biggest slump since the first lockdown as resurgence of the virus sparked panic buying in Beijing. Investors are rattled that the city could be plunged into lockdown following similar measures in Shanghai.

Around 3.5 million residents and workers in its biggest district, Chaoyang, must report for three coronavirus tests this week.

In Japan, the Nikkei (^N225) fell 1.9% while the Hang Seng (^HSI) slumped 3.6% in Hong Kong, and the Shanghai Composite (000001.SS) tumbled 5.1%. The CSI 300 index fell 5%, marking its biggest decline since February 2020.

Read more: UK house prices hit record high as homes sell faster than ever

Brent crude oil (BZ=F) also took a back foot with the oil benchmark falling to $102.17 per barrel on the day, a decline of 4.2% and its lowest level in two weeks, while West Texas Intermediate was trading close to support at $98 a barrel.

The prospect of a faster Federal Reserve tightening path this year, as central bankers aim to cool runaway inflation, as well as a potential ban of Russian oil by the European Union, also had an effect on prices.

Watch: Beijing COVID spike prompts mass testing, panic buying

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