Global stocks tumbled Monday after last week’s ugly close on Wall Street, when the Dow lost almost 1,000 points.
Concerns over strict new COVID-19 measures in Beijing drove Asian equities and oil prices lower.
Investors are nervous about the possibility of disappointing Big Tech earnings results this week.
US futures tumbled Monday alongside sharp falls for stocks around the world, as investors fretted about risks to economic growth from more-aggressive central bank policy and China extended lockdowns to Beijing.
Futures on the Dow Jones were down almost 1%, or 333 points, as of 5:20 a.m. ET, and S&P 500 futures fell 1%. Meanwhile, Nasdaq futures dropped 0.9%, suggesting a lower start to trading later in the day. The S&P 500 is down nearly 6% since the end of March.
Investors are worried the Federal Reserve’s pace of interest-rate rises could tip the economy into a recession, after its Chair Jerome Powell said a 50-basis-point hike is on the table at its May 3-4 meeting.
“His remarks led markets to further scale up the likely pace of Fed tightening, leaving futures priced for an almost 100% chance of 50-basis-point rate hikes at the next three meetings in May, June, and July,” UBS strategists said in a Monday note.
Expectations for the fed fund futures rate have risen from 2.47% to 2.83% in the last week, above the Fed’s estimate of neutral.
Policymakers at the European Central Bank, the Bank of England and elsewhere have echoed Powell in signaling more tightening may be needed to tackle inflation.
After some positive US earnings results last week, investors are nervous about the performance of mega-cap tech giants and the latest inflation reading on Friday. Big Tech names including Microsoft, Apple, Meta, Alphabet, Twitter, and Amazon are due to report quarterly earnings this week.
The risk-off sentiment extended to Asia, where equities fell steeply as Chinese authorities signalled Beijing could face stringent mobility restrictions, and as a coronavirus outbreak in Shanghai worsened.
“As cases erupt in Beijing, there is concern that prolonged lockdowns will hit employment and lead to a sharp slowdown in growth as well as sparking fresh shipping logjams and supply chain issues,” Susannah Streeter, senior investment analyst at Hargreaves Lansdown, said.
In Europe, stocks fell as investors braced for a drop in Chinese exports to key consumer markets and tighter monetary policy. Emmanuel Macron’s re-election as French president, seen as a reassuring sign of stability amid growing geopolitical anxiety, capped further losses in the region.