The new restrictions in China are reactivating fears of an economic slowdown due to the Asian giant’s slump in demand
European stock markets open with excitement a week marked again by the ballast of the new restrictions in China, reigniting fears of a new economic slowdown by the Asian giant that would also affect global demand.
A perspective that was most reflected in the evolution of oil prices for days. Just a few weeks ago, a barrel of Brent was again close to $100 after the production cuts announced by OPEC. However, that European reference is about to lose $80 with a drop of about 6% this Monday, its fourth consecutive drop. For its part, the US West Texas is trading at $75, up from 85 just four weeks ago.
New cases of Covid-19 and the first death in months from the disease have forced China to impose new lockdowns in some neighborhoods. And uncertainty about how this will affect global growth in the event of a full escalation of interest rates by central banks is very much in the parquet floors. In fact, European markets ended the session en bloc, with Italy adding the largest correction, almost 1.5%.
In the Spanish case, the Ibex-35 managed to withstand the tension, rising 0.75% to 8,188 points thanks to the push from majors such as Banco Santander, which rose more than 3% in the session leading up to the launches its new share buyback plan for 980 million euros.
Other bigs like Telefónica (+1.44%) helped avoid the bearish weight of companies like Repsol, which led the bottom of the table with a nearly 3% drop in the heat of the crude oil price slide. Acciona Energía (-2.05%), ArcelorMittal (-0.84%) and Acerinox (-0.68%) -the latter two most affected by fears of a drop in Chinese demand- trailed the value in the descents.
The volatility for the next few days is assured. Especially given the lower trading volume expected with Wall Street closed next Thursday for a Thanksgiving holiday, while only open for half a day on Friday.
The market will also closely monitor the evolution of values more closely related to consumption, ahead of the official start of the Christmas shopping season with the celebration of Black Friday and the decision of many of these companies – to report a large part of their results annually next weekend. – to anticipate their offers on these days.
For the time being, investors could continue to rely on what has been the main driver of the recovery in recent weeks: the expectation that central banks are about to end their rate hike process. Some analysts even indicate that they will reverse the process by the end of 2023 to avoid a deep recession. “We believe investors are overly complacent, both with inflation and with their expectations about central bank behavior in the future,” say Link Securities analysts, who estimate inflation will remain well above the 2% target for a long time to come .
While it is true that interest rate hikes could peak in 2023, experts believe that central banks will start winding down their balance sheets, further tightening general financial conditions. Investors expect the Fed and ECB to begin hinting at this possibility on Wednesday and Thursday, when the minutes of their latest meetings are released.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
