Stocks Tumble as China Lockdowns Rattle Investors: Markets Wrap

(Bloomberg) — Stocks and commodities tumbled as China’s worsening Covid outbreak fueled fears of a bigger slowdown in the world’s second-largest economy, compounding fears sparked by faster Federal Reserve tightening.

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The Stoxx 600 Europe Index fell almost 2% to the lowest in more than a month, with miners and energy firms at the forefront of losses. West Texas Intermediate futures slid around 3% to trade below $100 a barrel.

Fears of a wider lockdown in Beijing is spooking investors already fretting about supply-chain snarls and inflation. A broad gauge of Chinese stocks dropped to the lowest in almost two years as policy makers raced to stem an outbreak that’s already hobbled Shanghai amid the government’s steadfast adherence to its Covid-zero policy.

“The worry is the current policy support that the government has already put in place may not be effective because of the Covid policies,” Jenny Zeng, AllianceBernstein co-head of Asia Pacific fixed income, said on Bloomberg Television.

Meanwhile, the euro erased gains made after Emmanuel Macron’s win on a pro-business, pro-Europe platform in the French election removed a key risk for markets.

“Markets had well anticipated Macron’s victory, so they are already moving on. There are other worries weighing today,” said Frederic Leroux, member of the strategic investment committee at Carmignac Gestion. “Inflation remains a key worry.”

The outlook for inflation continues to hang over markets even as the pull back in commodities may provide some cushion. Federal Reserve Chair Jerome Powell had outlined his most bold approach yet to reining in surging prices and the European Central Bank signaled stronger tightening.

Treasuries snapped the rout of the past week that roiled markets while the dollar extended an advance as investors opted for safe havens.

U.S. Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Kyiv for talks as Russia’s war on Ukraine enters its third month.

Events to watch this week:

  • Tech earnings include Alphabet, Meta Platforms, Amazon, Apple

  • EIA oil inventory report, Wednesday

  • Australia CPI, Wednesday

  • Bank of Japan monetary policy decision, Thursday

  • U.S. 1Q GDP, weekly jobless claims, Thursday

  • ECB publishes its economic bulletin, Thursday

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