European Markets Slide as Global Growth Concerns Persist
Global markets have taken a hit due to growing concerns over economic growth. Find out why European markets are feeling the pressure and what this means for the future of the global economy.
On Thursday, global equities fell further because they were unable to sustain a late rally on Wall Street. Due to fears of sluggish growth, investors dumped stocks and bought government debt and Swiss franc which are safe-haven assets.
Covid-19 pandemic disrupt supply chain
Covid-19 had disrupted the supply chain and the disruption can still be seen today. The woes of the supply chain has continued to fuel both inflation and the concerns for growth. Cisco Systems Inc shares were knocked down to 13.7 percent due to persistent component shortages. The drop made Cisco Systems Inc the current big name stock to have post a significant decline this week in more than a decade.
According to the Federal Reserve bank survey, data showed a deceleration of factory output in the U.S. Mid-Atlantic region which is far more than expected back in May. For the six months ahead, business outlook appears to be the weakest in over 13 years.
Stocks under-performed
This year, some megacap growth stocks posted gains after having under-performed previously. However, the gains was not enough to keep the rally going and it fizzled out. The S&P 500 fell 0.58 percent while The Dow Jones Industrial Average lost 0.75 percent and the Nasdaq Composite seen a 0.26 percent lost.
Micheal James, the managing director of equity trading at Wedbush Securities. have said that investors are demoralized by the hit Walmart took on Tuesday followed by Target on Wednesday. The increasing cost across the supply chain have investors worried.
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According to James, portfolio managers who may have both Walmart and Target within their books may have a severe shocked to their system after finding out the losses of both companies. The stock loss for both Walmart and Target will be difficult to repair. Additionally, technology investors have experienced an extremely challenging year.
But as James pointed out, some kind of bounce is due since the view of the market has been extremely oversold. Rick Meckler, President of LibertyView Capital Mangagment LLC hedge fund, points out that as the near-term bottom approaches, traders are looking for a stimulus that will help to turn the market around. But as the market dips down, investors continue to experience fear.
Cash Hoarding has Reached its Peak
As markets started a downward turn, cash hoarding has began to reach its highest levels since 2001. Goldman Sachs predicts a recession will happen in the next two years whereas Morgan Stanley thinks there is a possibility of a recession within the next year.
The energy market have taken a hit as well. During a spring heatwave in the U.S., Americans used air conditioners to keep cool which led to some areas seeing an increase in natural gas prices and spot power on the U.S. energy infrastructure.
In monetary markets, after a two-decade high the dollar fell across the board as most major currencies drew buyers. The Swiss National Bank President Thomas Jordan announced that the SNB was on standby and read to act if pressures from inflation continued. This announcement caused the Swiss franc to experience some gains. Central banks have been attempting to regain control of inflation that have been decades-high while trying not to cause recessions that can be painful.
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