The World Bank and the IMF both warned of a potential recession in the coming months
After a short-lived relief, US stocks came under renewed selling pressure on Thursday as concerns about persistent inflation reemerged. On the data front, initial jobless claims came in better than expected as well as retail sales. On the negative side, retail sales were negative when excluding autos while manufacturing data showed a slowing economy. The Nasdaq Composite shed 1.43%, the S&P 500 fell 1.13%, and the Dow Jones dropped 0.56%. in individual stocks, shares of Adobe lost nearly 17% after the company announced a $20 billion deal to buy Figma.
Asian equity markets also fell on Friday, hurt by growing expectations of hawkish moves by the Federal Reserve. The Shanghai Composite index sank more than 2% after the data showed that Chinese house prices fell at their worst pace in seven years. On the other hand, industrial production and retail sales data surprised to the upside. However, investors were not inspired by the data as the World Bank and the IMF both warned of a potential recession in the coming months. As such, regional stocks are heading for the fifth weekly drop in a row.
Similarly, European stocks opened lower amid recession warnings from major institutions. The pan-European Stoxx 600 gave up more than 1% in early deals, with all sectors in negative territory. On the economic front, the data out of the UK showed retail sales fell 1.6% versus +0.3% previously and -0.5% expected. Elsewhere, ECB’s de Guindos warned that Eurozone slowdown is not enough to control inflation. US stock index futures were also lower in early pre-market deals.
As risk aversion intensified, the dollar stays resilient on Friday, albeit lacking the upside momentum to challenge the 110.00 immediate bullish target. The USD index switched into consolidation mode after the recent spike in volatility in the aftermath of a stronger-than-expected inflation report out of the US. As such, EURUSD continues to oscillate below parity, also struggling to regain the descending 20-DMA. A failure to hold above the 0.9955 region in the near term would pave the way to deeper losses.