Global shares hit 6-month lows, as investors punish risk assets, unleashing a cryptocurrency bloodbath
- Global shares and cryptocurrencies tumbled on Thursday, as investors ditched risk assets.
- A hotter-than-expected read of US inflation has ignited investor concern over a hit to the wider economy.
Global shares slid, while cryptocurrencies and other risk assets such as technology stocks were pummeled on Thursday, after US data showed inflation ran far hotter last month than expected, unleashing fears of even more rapid rate rises and a dent to economic growth.
US data on Wednesday showed consumer inflation rose by 8.3% last month, slowing marginally from March's 8.5% increase, but above forecasts for 8.1%. The rise was driven by fuel and food prices, as well as shelter and new cars.
The MSCI All-World index dropped 0.8% to an 18-month low, as shares in Europe and Asia sagged in volatile trade.
US stock index futures dropped, with those on the S&P 500 and the Dow Jones falling between 0.4-0.5%, while those on the Nasdaq 100, which boasts inflation-sensitive tech stocks, dropped by 0.8%. The index lost 3% on Wednesday, and even shares in Apple tumbled 5%, paving the way for Saudi Aramco to become the world's largest company by market value.
"Stock markets remain under pressure globally, and the steady rise in US CPI has reaffirmed expectations that the Fed will maintain the steady pace of tightening at its next two meetings. A rout in highly-valued stocks like Beyond Meat, which rose sharply during the pandemic, and in cryptocurrencies, continues to contribute to a sharply risk-off atmosphere," strategists at IG.com said.
In Europe, the Stoxx 600 fell almost 2% to a two-month low, while in Asia, the MSCI Asia ex-Japan index dropped 2.4%, led largely by a rout in Hong Kong tech stocks that stripped over 3% off the local tech index.
"While yesterday's report was scrutinized for signs of peak inflation, more importantly it provided evidence of persistent inflation. A closer look at the report shows that the decline was largely driven by easing energy and commodity price inflation," Rabobank US strategist Philip Marey said.
"Whether you think that inflation has peaked or not, it is not going away anytime soon," he said.
Cryptocurrencies were battered, with bitcoin dropping 12%, while other large tokens such as ethereum, solana and cardano racked up losses of at least 20% in the last 24 hours. The crypto market as a whole has lost over $500 billion in value in the last week alone, according to CoinMarketCap.
Turbulence in the market intensified this week with the collapse of algorithmic stablecoin TerraUSD, which lost its 1:1 peg to the dollar as the sell-off in crypto picked up speed.
"Elsewhere in markets, a significant story over the last 24 hours has been the significant price declines in a number of major cryptocurrencies. Bitcoin is at $27,617 as I type, a level not seen since December 2020," Deutsche Bank's Jim Reid said.
UK data showed the British economy slowed by a lot more than expected in the first quarter of the year, and even contracted in March, falling by 0.1%, squeezed by the cost of living crisis prompted by steep rises in energy and food prices.
"While this still left activity up 0.8% over the first quarter as a whole, the March decline highlights the pressure the economy is now coming under from the cost-of-living squeeze and the danger of it falling into outright recession later this year," Rupert Thompson, an investment strategist at asset manager Kingswood, said.
The pound dropped to its lowest in two years against the dollar, falling 0.4% on the day to $1.220, while against the euro, it hit its weakest in seven months, trading down 0.1% on the day at 85.70 pence per euro.
Ukraine on Wednesday officially shut off some flow of Russian natural gas to Europe in response to what it said was interference from hostile troops. Dutch benchmark natural gas futures jumped almost 12%, while UK gas futures rose by almost 16%.