Stocks Fall Amid Recession Worries; Euro Tumbles: Markets Wrap


(Bloomberg) — US index futures and European equities fell as concern over the possibility of a recession outweighed optimism over US-China talks aimed at tariff reductions. The euro fell to a 20-year low against the dollar.

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Contracts on the S&P 500 and Nasdaq 100 indexes dropped at least 0.6% each as US markets were set to return after Independence Day holiday. European stocks tied to economic activity, such as carmakers and commodity companies, posted the biggest losses among peers. Investors rushed to the safety of the greenback, while a selloff in Treasuries eased.

US and Chinese officials held discussions amid reports Washington may roll back some of the trade levies imposed by former President Donald Trump. While that came as a relief, investors continued to fret over a potential US recession, stubborn inflation and monetary tightening. Economic reports in Europe, including French purchasing managers’ indexes, came in below estimates.

“The Fed will likely remain aggressive in its fight against inflation for now,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “At the same time, European growth is slowing down fast. This just puts additional fire on the growth concerns about the US.”

US markets reopen Tuesday after capping 11 declines in the past 13 weeks as a first-quarter contraction in the world’s largest economy boosted the prospects of a recession. At the same time, consumer prices are far from peaking with inflation surging to 8.6% in May that left little room for the Federal Reserve to slow monetary tightening.

Treasuries pared a slump as a risk-off sentiment took hold. The two-year yield was 2 basis points higher, after rising as many as 13 basis points. In Europe, bonds rallied after Monday’s selloff.

The euro extended its losses, tumbling to the lowest level since 2002 against the dollar. It also slid to the weakest since January 2015 against the Swiss franc. A gauge of the greenback’s strength rose 0.6%.

Recession fears echoed in US premarket trading, where Carnival Corp. and ASML Holding NV dropped more than 4% each.

In Australia, the central bank raised its key interest rate as expected to 1.35%. It’s among more than 80 central banks to have raised rates this year. The nation’s dollar weakened after the decision.

Brent crude slipped below $113 per barrel. Bitcoin fell below the $20,000 level.

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What to watch this week:

  • PMIs for euro area, India among others, Tuesday

  • US factory orders, durable goods, Tuesday

  • FOMC minutes, US PMIs, ISM services, JOLTS job openings, Wednesday

  • EIA crude oil inventory report, Thursday

  • Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday

  • ECB account of its June policy meeting, Thursday

  • US employment report for June, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.7% as of 10:32 a.m. London time

  • Futures on the S&P 500 fell 0.6%

  • Futures on the Nasdaq 100 fell 0.7%

  • Futures on the Dow Jones Industrial Average fell 0.6%

  • The MSCI Asia Pacific Index rose 0.2%

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index rose 0.6%

  • The euro fell 1.1% to $1.0305

  • The Japanese yen was little changed at 135.66 per dollar

  • The offshore yuan fell 0.2% to 6.7107 per dollar

  • The British pound fell 0.6% to $1.2041

Bonds

  • The yield on 10-year Treasuries was little changed at 2.88%

  • Germany’s 10-year yield declined seven basis points to 1.26%

  • Britain’s 10-year yield declined seven basis points to 2.13%

Commodities

  • Brent crude fell 0.6% to $112.79 a barrel

  • Spot gold fell 0.7% to $1,804.43 an ounce

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