Wall Street dips as FTSE shakes off slump

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Wall Street lost ground as the FTSE 100 pushed higher as investors bought the dip following three days of selling. Photo: Angela Weiss/AFP via Getty Images
Wall Street lost ground as the FTSE 100 pushed higher as investors bought the dip following three days of selling. Photo: Angela Weiss/AFP via Getty

European stocks pushed higher as markets rebounded after being rocked by a series of geopolitical and economic headwinds, which also hit other assets including oil and cryptocurrencies.

In Britain, the FTSE 100 (^FTSE) gained 0.5%, while France’s CAC (^FCHI) was 0.6% higher and the DAX (^GDAXI) added 1.2% in Frankfurt.

It comes as Prince Charles said the government will drive economic growth to "improve living standards and fund sustainable investment in public services", in Tuesday's Queen's Speech.

On Monday, the FTSE All-World barometer of global stocks fell as much as 3% on Monday, its sharpest drop since June 2020 and its lowest level since December 2020, adding to fears that the global economy is heading for a sharp slowdown, stagflation or recession.

Michael Hewson, chief market analyst at CMC Markets, said: "While investors have spent most of the last few months fretting about events in Europe and the war between Ukraine and Russia, there had been the hope that the Chinese economy might be able to pick up the slack, as far as global growth is concerned.

Read more: Queen's Speech delivered by Prince Charles promises cheaper energy bills

"Yesterday the penny finally dropped that this was unlikely to happen, after another poor set of China trade numbers affirmed the idea that no matter how poor the economic data, Chinese authorities don’t appear to be in any mood to change tack when it comes to their current zero-COVID policy, as authorities in Beijing and Shanghai tightened COVID restrictions further over the weekend."

Across the Atlantic, US benchmarks rebounded on Tuesday after tumbling to new lows for 2022 as interest rate rise concerns coincided with global growth fears and recession fears gripped indexes. But indexes lost ground in mid-morning trade.

The Federal Reserve warned of deteriorating liquidity conditions across key financial markets amid rising risks from the Ukraine conflict, monetary policy tightening and surging inflation.

"While the recent deterioration in liquidity has not been as extreme as in some past episodes, the risk of a sudden significant deterioration appears higher than normal," the US central bank said in its semi-annual Financial Stability report.

Wall Street’s S&P 500 (^GSPC) shed 18.24 points, or 0.5%, to 3973.00, after breaching the 4000 level for the first time since March 2021 on Monday close. The tech-heavy Nasdaq (^IXIC) edged 0.2% lower, while the bluechip Dow Jones (^DJI) lost 0.5% at London's close.

"Stocks are trying to bounce once again, but it seems like a fruitless exercise given the poor global outlook," said Chris Beauchamp, chief market analyst at online trading platform IG.

"Stomach-churning volatility continues to dominate financial markets," he added. "After the sharp falls of last Friday and yesterday, some cautious buying has come in, but it looks like the best that they buyers can muster is a holding action for now."

Read more: What if Bank of England fails to control inflation?

Asian stocks were mixed overnight with the Nikkei (^N225) dipping 0.6% in Japan, while the Hang Seng (^HSI) lost 2.3% in Hong Kong as the city’s markets reopened after a long weekend. The Shanghai Composite (000001.SS) gained 0.8%.

It came as bitcoin (BTC-USD), the world’s largest cryptocurrency, dropped below $30,000 for the first time since July last year as the global market selloff correlates with a decline in cryptoassets.

Meanwhile, oil prices continued to slide after European Commission president Ursula von der Leyen said the bloc had made some progress in talks over its proposed ban on Russian crude imports, but warned further work was needed.

Brent crude (BZ=F) was trading 0.2% lower to $105.73 a barrel. US light crude (CL=F) fell 0.4% to $102.68 at the time of writing.

Watch: How does inflation affect interest rates?

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