Uncertainty Prevails In Global Markets

With US Federal Reserve going ahead with an aggressive rate hike and most global central banks following suit, a sense of uncertainty is flowing through the world markets[EasyDNNnews:PaidContentStart]

Business developments of the last fortnight were consumed by the news of the world’s richest man buying the popular micro blogging and social networking site Twitter. However, what jolted the investor sentiments was the US GDP data. The numbers were far worse than what analysts had expected, which came after the country’s economy had grown 6.9 per cent in the final quarter of 2021. US economic growth fell 1.4 per cent annualised in the first quarter of 2022 as the Omicron variant of the corona virus and tapering of government spending hit consumers and business.

As the United States is already reeling under record inflation and recovering from the pandemic, the world’s largest economy has raised fears of recession, sooner rather than later. Adding to the woes are such factors as the increasing fuel prices due to Russia’s invasion of Ukraine and global supply chain disruption. The MSCI world equity index gained 4.91 points or 0.75 per cent to 658.81. The pan-European Stoxx 600 ended higher by 0.4 per cent, with travel, automobile and technology stocks leading the surge as most sectors and major indices closed in the positive territory.

However, in the last fortnight, there has been a mixed trade as fear persisted over Ukraine and energy supplies to the region following Russia’s decision to stop gas flows to Poland and Bulgaria.

"As the United States is already reeling under record inflation and recovering from the pandemic, the world’s largest economy has raised fears of recession, sooner rather than later. Adding to the woes are such factors as the increasing fuel prices due to Russia’s invasion of Ukraine and global supply chain disruption"

The nervousness about China’s economic slowdown rattled Australian shares in the past week with the local benchmark down 1.78 per cent, particularly due to a slowdown in mining. The Asian markets held on to small gains in the fortnight, thanks to strong US’ trade sessions. In Asia, the markets are headed for its worst month in two years as China fears growth concerns and looming rate hikes in the US. MSCI’s broader index of Asia-Pacific stocks outside of Japan rose 0.2 per cent on an average. The upcoming meeting of China’s Politburo, the country’s top decision-making body, will be in focus as markets look for more signs of economic stability. But, according to analysts, Beijing’s zero-virus strategy limits the policymaker’s options as supply chains are disrupted, while operations at many factories have shrunk. In China’s capital city Beijing schools and public spaces have been closed as most of the 22 million residents asked for more mass virus testing to avoid a Shanghai-like lockdown. US Treasury yields were trading within their recent ranges, slightly down from their recent highs. The benchmark 10-year yield ended the US session at 2.8205 per cent, having peaked at 2.981 per cent on April 20. The two-year yield was at 2.6132 per cent.

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