Wall Street sinks: Dow Jones -1.99%, Nasdaq -4.29% – Economy

Bags in deep red. The explosive mix of war, inflation and lockdown in China sinks the financial markets from Asia to the United States passing through Europe, where the lists close at the lows of the last two months thanks to the drop in oil which weighs down energy. Piazza Affari closed down by 2.74% with the spread rising to 205 basis points while the yield on BTPs jumped to 3.22%, on the levels of November 2018.

Instead, a thud for Wall Street, which has closed at the mini for 13 months. The sell-off that hits the stock markets is linked to the action of the central banks, which are quickly starting to withdraw the stimulus measures put in place for the pandemic in an attempt to contain inflation, and to the investors who hastily do a step back in the face of signs of slowing growth. What is worrying is the news coming from China where the lockdowns for Covid are starting to be felt on the economy, making the rest of the world tremble. Chinese exports slowed significantly in April, climbing a modest 3.9%, in what is the first single-digit growth in 18 months. The uncertainties linked to the war in Ukraine and the effects of sanctions add to the slowdown in Beijing.

The invasion accelerated the global price rush, prompting central banks to take decisive action against inflation at its 40-year high. To restore price stability, the Fed has embarked on the most aggressive interest rate hike since 1980 accompanied by a rapid reduction in the balance sheet, which soared to $ 9 trillion with the pandemic. After raising rates by a quarter of a point in March, the US central bank adjusted them by another half point in May and opened the door to a series of 50 basis point hikes in upcoming meetings.

The squeeze, is the fear of economists and investors, risks slipping the American economy into recession, not yet fully recovered after the pandemic, or even worse, into stagflation. The Fed, in its six-monthly report on financial stability, states that persistent high inflation along with a sudden rise in interest rates are among the major short-term risks for the American financial system. The central bank also warns that the war in Ukraine could impact financial stability as well as the global economy as noted by Treasury Secretary Janet Yellen. A complex picture in which uncertainty, the biggest enemy of the stock exchanges, prevails. On Wall Street – where the Dow Jones closed down 1.99%, the Nasdaq by 4.29% and the S&P 500 by 3.21% – it is technology that pays the highest price.

After a two-year run with Covid, Big Tech not only brakes but nails. From Meta to Google, from Apple to Amazon all the big giants suffer heavy losses. Cupertino loses 3.08%, Jeff Bezos’ giant loses 5.12% and Facebook and Twitter 3.69% “Market volatility shows that there is great uncertainty about where we think we are headed”, they say some analysts worried about the Fed and the limits of its action in fighting inflation in a context of war in Ukraine that gives wings to energy prices and lockdowns in China that make it difficult for supply chains to return to normal. The drop in the stock exchanges is accompanied by that of oil, with the WTI closing down by 6.1%, and the crash of Bitcoin.

The cryptocurrency plummets to dips below $ 31,000, losing 50% of its value since the peak in November. Just compared to seven months ago, the digital currency market is sending $ 1.6 trillion up in smoke. “With fears of inflation, many investors are taking a risk-limiting approach that includes selling cryptocurrencies and equities.” observers. For crypto skeptics, the decline shows that Bitcoin cannot be considered a safe haven asset: the digital currency has lost over 29% this year compared to -10% of bonds and shares and above all compared to + 2.5% of the gold, the safe haven asset par excellence.