US stocks opened in bear market territory on Monday, down 20 percent from their peak in January, a sign of growing pessimism about the economy’s outlook.
Markets around the world tumbled as higher-than-expected inflation and weaker-than-expected economic growth changed the outlook for interest rates and corporate earnings. Stocks in Asia and Europe fell, investors dumped government bonds, oil prices fell, and cryptocurrencies crashed.
The S&P 500 fell 2.5 percent at the start of trading as a selloff continued. The S&P 500 briefly dipped into bear market territory last month, before bouncing back to close just above it. Markets have been skittish ever since, with the S&P 500 posting its worst weekly loss since January last week.
The benchmark U.S. stock index is now “in the bad day’s move of a bear market, and equity futures suggest we haven’t yet seen all of the negative sentiment expressed,” ING analysts wrote in a statement. note to investors on Monday morning. The S&P 500 has fallen in nine of the last 10 weeks.
A report on Friday showed a spike in inflation in the United States, rattling markets as investors worried the Federal Reserve may have to raise interest rates higher and faster than expected to curb rising prices, a move that could hurt the US economy.
Global investors sold stocks, bonds and other assets as inflation runs high in many countries, supply chains remain tangled and economic growth forecasts are being downgraded.
Asian stock markets closed in the red, with Japan’s benchmark Nikkei 225 index falling 3 percent and South Korea’s Kospi falling 3.5 percent. In Hong Kong, shares fell 3.4 percent, while the index of China’s largest Hong Kong-listed companies fell 3.6 percent. The Japanese yen fell to a 24-year low against the US dollar.
Fears in the region increased on Monday after officials in Beijing and Shanghai re-imposed social distancing measures after another round of mass testing over the weekend. China’s economic growth has been hit by the country’s “zero Covid” pandemic policy that left much of the country under some form of lockdown for months earlier this year.
In Europe, the Stoxx 600 index fell 2.2 percent, hitting its lowest level since early 2021. Britain’s FTSE 100 fell 1.7 percent after news that the country’s economy contracted. unexpectedly in April, falling 0.3 percent from March. Economists expected a small increase in growth.
European bond prices fell sharply as traders priced in a series of interest rate hikes by the European Central Bank in reaction to high inflation in the eurozone. Yields on German and Italian government bonds, which move inversely to prices, hit multi-year highs, implying a sharp rise in borrowing costs.
Cryptocurrencies, which some believe could act as a haven in times of inflation and turmoil, have also been hit hard. Bitcoin, the largest cryptocurrency, fell to an 18-month low below $24,000. It has lost about half its value so far this year. The value of all cryptocurrencies fell below $1 trillion for the first time since early 2021, according to Coinmarketcap, some $2 trillion below its peak.