World markets fell sharply on Monday as fears over rising inflation and a slowdown in China’s export growth fueled concerns about the health of the global economy.
Stocks in markets across Asia-Pacific, Europe and the US fell into the red as investors feared global growth was weakening, at a time when central banks are raising interest rates to curb rising inflation.
In London, the FTSE 100 fell to its lowest level in eight weeks, down 2.32% or 171 points to 7,216 at the close of trading on Monday, with mining companies among the decliners. Japan’s Nikkei had closed down 2.5% on Monday.
Stocks fell after China’s export growth hit a nearly two-year low of 3.9% annually in April, down from 14.7% in March. Imports were flat as Covid outbreaks in China reduced demand and disrupted manufacturing.
Analysts said the slowdown showed the world’s second-largest economy was suffering from lockdowns in big cities like Shanghai, which hit factory output and hampered logistics chains.
“Two of the biggest concerns are supply chains and the impact of inflation, including higher interest rates. As a result of the severe Covid lockdowns, China’s export growth is at its lowest point in two years,” said Mihir Kapadia, CEO of Sun Global Investments. “Supply chain disruptions, in turn, will affect the profits of companies around the world, and thus their stocks.”
European markets fell to a two-month low, down 2.9% at the close of trading. In New York, the S&P 500 index fell 3.2% on Wall Street – its lowest point in a year – after its worst weekly losing streak in more than a decade. The tech-heavy Nasdaq fell 4.29% as investors once again sold off once-popular tech stocks.
Commodities weakened, with copper prices hitting their lowest level since mid-December in London at $9,160 (£7,440) a tonne. Aluminum, zinc, nickel, lead and tin prices also fell, on concerns that China’s restrictions are affecting manufacturing output.
Emerging market stocks hit their lowest level since June 2020, as a slowdown in China’s economy added to pressures from rising global interest rates and the continued disruption of the Ukraine war.
Chinese Premier Li Keqiang warned on Saturday that China’s employment situation was “complex and serious,” calling on government departments and regions to prioritize measures to support and preserve jobs. That reinforced concerns that China’s lockdowns are having a serious economic impact.
U.S. government bonds were also hit by fresh sales, pushing the yield, or interest rate, on the 10-year Treasury note to the highest level since November 2018. Yields rise when prices fall.
The US dollar hit a new 20-year high, buoyed by expectations of steeper US interest rate hikes this year to tackle rising inflation, which stands at 8.5%.
“There is no way to stop the mighty US dollar,” said Marios Hadjikyriacos of the XM brokerage. “Stress in equity markets, concerns about a synchronized global economic slowdown and the relentless rise in US yields continue to drive demand for the reserve currency.”
Risk assets like cryptocurrencies were also affected. Bitcoin fell to its lowest level since July 2021, falling below $32,700. It has lost half of its value in the last six months.