Despite recession risks have abated somehow, investors stay cautious, suggesting the recovery potential is limited
Wall Street equities plunged on Monday as the selling pressure intensified, with major indexes sliding to new lows for the year. The sell-off was due to a growing probability of an economic slowdown or even recession in the US. Also, the outlook for the global economy is getting cloudier amid geopolitics and stubbornly high inflation. The Dow Jones Industrial Average dropped nearly 2%, the S&P 500 fell 3.2%, while the Nasdaq Composite lost 4.29%.
Asian stock markets fell to their lowest in nearly two years on Tuesday. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.8%. The Nikkei 225 in Tokyo lost 0.58% and Hong Kong’s Hang Seng dropped 1.75%. Sydney’s S&P-ASX 200 declined 0.98%. Bucking the trend, the Shanghai Composite index added nearly 1% after the Chinese government announced some supportive measures for small businesses in another effort to boost economic growth. A day earlier, China reported export growth fell in April due to weak global demand.
Meanwhile, European stocks opened higher to start the day to bounce off two-month lows seen on Monday. The pan-European Stoxx 600 added 0.9% in early trade. The UK’s FTSE 100 index rose 0.81%, boosted by mining and banking stocks. Despite recession risks have abated somehow, investors stay cautious, suggesting the recovery potential is limited at this stage while downside risks persist.
Meanwhile, the USD index came off twenty-year highs registered above 104.00 on Monday. The safe-haven greenback finished marginally lower overnight, staying under some pressure today as risk aversion has eased since the previous session. As such, EURUSD retains a modest bullish bias on the intraday timeframes, but still staying below 1.0600 in early European deals. The pair stays around long-term lows, looking vulnerable to further losses after a pause.
