European shares fell on Friday, following a bad day on Wall Street, as investors worried about the outlook for global growth.
The Stoxx 600 stock index in the region lost 1.2%, putting it on track to end the week 3% lower. London’s FTSE 100 lost 0.8% and Germany’s Xetra Dax fell 1%.
The negative sentiment was reflected in a quiet overnight session in US stocks as investors worried about the likely pace of rate hikes as a recession looms.
Wall Street’s tech-heavy Nasdaq Composite Market Share Index 5% off on Thursday, marking the biggest single-day drop since June 2020. Traders dumped shares of big-name growth companies including Tesla and Apple, which are valued. The high has been pressured by the US central bank to tighten monetary policy. The broad S&P 500 index lost 3.6%.
Those worries spread to Asia, where the FTSE Asia Pacific index of Asia Pacific stocks, which excludes Japan, fell 2.8%. Chinese President Xi Jinping added to the weak sentiment by strengthen the nation’s commitment for its Covid 0 policy, which restricted tens of millions of people to their homes and slowed the economy.
The Federal Reserve raised interest rates by 0.5 percentage points on Wednesday, in a move that initially lifted market mood as it eased concerns that the central bank will raise interest rates more aggressively. That upside, however, was quickly picked up as investors focused on how long the Fed could raise borrowing costs to battle rising consumer prices.
“We don’t know how much central banks need to do to slow inflation,” said Emmanuel Cau, head of European equity strategy at Barclays. “Without any sense of it peaking, or starting to slow down, the market will remain volatile.”
Early signs from the US futures market also suggest prices will continue to fall on Friday. Futures contracts on Nasdaq 100 traded down 0.6% while S&P 500 futures fell 0.4%.
US Treasuries were calm ahead of US monthly jobs data due later in the session, which investors will watch closely for signs that inflation – already at a 40-year high – is getting worse.
“Our view is that the Fed won’t be able to achieve a soft landing and a recession is underway,” said Deutsche Bank strategist Jim Reid.
The yield on the 10-year US Treasury note, which rose above 3.1% on Thursday, was flat at 3.07%.
Economists polled by Reuters expect the April nonfarm payrolls report to show median earnings rising more than 5% year-on-year for the fourth straight month.
“A strong jobs report can be taken on a positive note, as a hint that the economy is strong, growing well and we don’t need to worry too much about a slowdown. [caused by higher interest rates]said Caroline Simmons, UK Investment Manager at UBS’s wealth management unit.
But if the data shows a tightening labor market, investors may conclude that “the Fed must act faster,” she warned.
The dollar index, which measures the currency against six other currencies, was down 0.2%. It remains near a 20-year high, reflecting caution towards riskier assets, boosting haven demand.
Brent crude rose for a third session in a row, up 1.6% to just over $112 a barrel, bolstered by expectations of tighter supply as the EU prepares. attack Russia with an oil embargo to deal with the war in Ukraine.
