European stock markets fall again after another Nasdaq plunge

The respite was short-lived. After two rebound sessions, the Paris Stock Exchange sank again into the red on Wednesday. Between galloping inflation in the United States and the prospect of a sharp slowdown in Chinese growth, investors remain extremely nervous.

The CAC 40 index plunged 2.26% to 6,127 points at the opening, after another plunge of more than 3% by the Nasdaq, the Wall Street index with strong technological coloring, the day before. This Thursday morning, the Tokyo, Hong Kong and Shanghai stock markets all closed lower. The other European markets also started the session in the red. The German DAX fell by 2.1% and the London FTSE by 1.9%.

Volatility still high

Sign of the strong nervousness of the investors, the chaotic sessions are linked on the financial markets. The US stock market volatility index, the VIX, nicknamed the fear index, has settled above 30 points for the past five sessions. It must be said that the losses are growing. Since the beginning of the year, the CAC 40 has plunged by 14%, the S&P 500 by 17% and the Nasdaq has collapsed by 27%.

The maintenance of US inflation at 8.3% over one year in April after 8.5% in March revived fears that the Federal Reserve would be forced to give a further boost to its monetary tightening policy. What reinforce the attractiveness of the greenback. The euro sank below the $1.05 threshold on Thursday morning for the first time since 2016. It is now approaching its lowest level in more than twenty years. At the same time, the prospect of a severe economic slowdown, or even a global recession, has increased, reducing the chances of a soft landing for the US economy.

Economic downturn on the horizon

In Europe, the question of Russian gas deliveries still poisons the energy markets. The economic situation in China is also worrying. The world’s second largest economy remains stuck in its “zero Covid” health policy. Not enough to relieve pressure on the real estate sector: the country’s fourth developer, Sunac, officially defaulted on its obligations on Wednesday.

In the storm, investors are finding refuge with the debt of States considered to be the safest. Sovereign bond yields – which move inversely to price – fell sharply. In the United States, that of Treasuries (American Treasury bonds) with a maturity of 10 years fell to 2.82%, while in Europe, the German Bund with the same maturity fluctuated around 0.88%, in decline of 9 basis points, Thursday morning.

Conversely, investors are turning away at high speed from the most speculative assets. The tumble of cryptocurrencies amplifies. Bitcoin fell another 8% on Thursday to around $26,000. Its value has melted by more than 60% since its record of November 11, to more than 67,000 dollars.

Leave a Reply

Your email address will not be published. Required fields are marked *