Global declines in stock markets, cryptocurrencies and other risky assets have gathered momentum amid growing concerns that out-of-control inflation, rising interest rates and slowing growth could propel the world into recession.
Share prices in Asia fell on Friday at the start of what looked to be another tough day for investors feared by the US Federal Reserve’s decision this week. Raise interest rates by the biggest margin for almost 30 years,
Other major central banks such as the Bank of England and the Swiss National Bank have followed suit – the latter in its first hike for 15 years – sending economists to revise their forecasts for downward growth.
Stephen Innes, at SPI Asset Management in Hong Kong, said: “Any central banker worth his weight would not put the inflation-fighting credentials on the line and import high energy inflation through a weak currency.
The Bank of Japan announced on Friday that it was sticking to its ultra-lax monetary policy, saying rate hikes elsewhere were a “highly ominous sign for stock market investors … the global race for rate hikes anywhere”. Not finished. Line”.
Many believe the United States could be hit by a recession by next year, raising the prospect of a wider global recession.
Shares of the world’s largest economy have suffered their worst start to a year in 60 years, with the S&P 500 benchmark index down another 3.25% on Thursday. Analysts at JP Morgan said the position of the S&P 500 “implies 85% chance of US recession”,
The falls – reflecting on the Dow Jones average, the tech-heavy Nasdaq and the UK and European markets – did little to boost confidence in Asia Pacific where the Sydney market was down 2.4% on Friday morning, while Tokyo and Hong Kong were both off more than 2%. More.
The cryptocurrency route also shows no signs of ending with Bitcoin down nearly 10% and Ethereum 13% worse. Furthermore, the Financial Times reported that Singapore-based crypto hedge fund Three Arrows Capital – which has $10 billion under management – failed to meet margin calls this week amid a drop in crypto values.
The outlook is worsened by the prospect of conflict in Ukraine and the West’s economic war on Russia, pushing energy prices even higher ahead of the northern hemisphere’s winter.
“The pace and degree of policy hardening could prove to be too much for economies to handle, especially given the ongoing commodity price shock,” economists at NAB Bank in Australia said in a note on Friday. “As a result, the risk of recession is uncomfortably high for many major advanced economies, including the US.”
David Basneys, chief economist at BetaShares in Sydney, went further and predicted a US recession “within the next 12 months”, due to persistent inflation and a pledge by the Fed to raise rates until the inflation genie is back in the bottle.
As a result, he said the stock markets in the US further declined. “There seems to be room for further downside in the equity markets. My base case would be a 35% decline from the last peak to trough in the S&P 500, indicating a decline of 3,100 from its closing peak of 4,796 on Jan. It had closed at 3,667 points on Thursday.
The ongoing coronavirus lockdown in China is creating more problems for the global economy. Supply chain disruptions in the world’s second-largest economy that began during the pandemic are projected to continue through next year, at least thanks to the closures of Shanghai and other major regions.
The bigger picture is that China was already facing problems ranging from disengagement from the West amid geopolitical tensions, a faltering, highly indebted property market and uncertainty caused by President Xi Jinping’s crackdown on big tech companies.
As the West raises rates, China’s central bank cutting them And the government in Beijing is throwing more stimulus at the economy, though it may not be enough to restart the global economy as its massive $4tn stimulus did after the 2008-09 global financial crisis.
The Bank of England’s decision to raise rates by 0.25% on Thursday has been criticized by some as too late to stop inflation in its tracks. One forecast says that prices will rise by 11% by October and another report says that food prices will rise can be above 15% in the autumn.
The British economy shrank 0.3% in May, according to data released on Monday, and followed a 0.1% decline in “Increased” Chances That The Economy Will Slip Into RecessionAccording to Paul Dales, chief economist at consultancy Capital Economics.
The Eurozone is also woefully lame and skeptical about how to deal with it. Separating the actual borrowing cost Between different countries which means Italy has to pay more than Germany despite having the same currency.
The Economist Intelligence Unit (EIU) said in a report that although the US recovered from the pandemic recession more quickly than other economies, there were signs that consumer spending was weakening. Its basic view is that US growth will stall before the recession, but it could be a close call.
“The EIU’s main forecast is that economic growth in the US will slow sharply during 2022 and 2023 due to extremely high inflation, rising interest rates, and stunting growth elsewhere,” it said.
“We expect consumer demand to be resilient enough to survive an outright slowdown, thanks to a tight labor market and strong domestic balance sheet. However, that doesn’t mean the recession has stopped completely.”