Global stocks on Tuesday pointed to a potential rebound on Wall Street, a day after a market rout put the S&P 500 in bear market territory with losses of more than 20 percent from its recent peak.
Stock futures in the United States rose on Tuesday, while European markets climbed higher in early trading. After an initial steep sell-off, many markets in the Asia-Pacific region recovered some their losses.
Global markets are on shaky ground as multi-decade highs in inflation, supply-chain shortages and geopolitical tensions weigh on the outlook for growth around the world.
It’s a tricky balancing act. If the Fed moves too aggressively to rein in inflation, it could put the brakes on the U.S. economy and cause a recession.
The State of the Stock Market
The stock market’s decline this year has been painful. And it remains difficult to predict what is in store for the future.
Such concerns triggered a sell-off in the United States on Monday, when the S&P 500, the benchmark stock index, lost 3.9 percent. Since reaching a record high in January, the S&P 500 has fallen 22 percent, marking the seventh bear market in the last 50 years.
The weakness continued in the Asia-Pacific region on Tuesday, although many markets had pared their losses by the afternoon. Japan’s Nikkei index was down 1.3 percent at the close while China’s Shanghai Composite Index rebounded late in the day to finish up 1 percent. In Australia, the key stock index tumbled about 3.5 percent, the biggest single-day drop in two years.
“Investors are just re-evaluating global risk,” said Bruce Pang, a Hong Kong-based analyst with China Renaissance Securities. “They want to play it safe.”
Stock indexes across Europe climbed higher. The Stoxx Europe 600 rose 0.5 percent, halting five consecutive days of losses and pulling away from its lowest level since March 2021. The FTSE 100 in Britain rose 0.5 percent and the DAX in Germany climbed 0.8 percent higher.
Investors have been trying to make sense of what’s happening in the global economy.
The World Bank issued a grim warning last week, saying recession will be hard for many countries to avoid. On Monday, the credit rating firm Fitch cut its 2022 forecast for global gross domestic product, or G.D.P., to 2.9 percent, from a March estimate of 3.5 percent.
Uncertainties abound, clouding the outlook even more.
Russia’s invasion of Ukraine has further strained an already stretched global supply chain while weighing on global food and oil supplies. As inflation surges, central banks around the world have been moving to raise rates.
China is also complicating the picture. As the Chinese government doggedly pursues a zero-Covid strategy, the resulting lockdowns and restrictions have crimped China’s growth and added to the global supply chain woes. Chinese officials are increasingly concerned about the state of the economy, raising doubts that the country will meet its growth targets.
In its forecasts, Fitch cited concerns about “restrictive” monetary policy and inflation, noting that the supply disruptions from the war between Russia and Ukraine are having a “swifter impact on European inflation than expected.” The rating agency also slashed growth projections for China because it did not expect the economy to bounce back quickly given the government’s commitment to the zero-Covid policy.