Record inflation: Stock markets are losing money around the world

record inflation
Stock exchanges are losing prices all over the world

The stock market crash continues. Inflation and interest rate hikes cause big losses. It doesn’t look like that anytime soon.

The new trading week begins just like the old week ended: price declines. There is no improvement. With high inflation, interest rate returns and related fears of recession, the global decline in prices continues.

DAX 12,742.50

Dax drops by 1.7 percent in the morning. up to 13,522 points. The May minimum of 13,380 points for the leading German index is approaching. Losses from the average peak from last week now amount to 7.4%. The European Stoxx 600 was down 1.6 percent, reaching its lowest level since early March.

“Interest rates and inflation remain two scarecrows in the markets,” says Thomas Altmann of QC Partners asset manager. On the one hand, rising interest rates have a direct impact on corporate profits. On the other hand, it would make bonds increasingly competitive for interest-free stocks.

Things went on in Asia as well. Expressed in numbers: Japan’s Nikkei index lost a good 3 percent to 26,987 points, the broader Topix fell 2.2 percent. The stock exchange in Shanghai fell 1.1 percent, the index of the most important companies in Shanghai and Shenzhen lost 1.4 percent. In the US, the major indices Dow Jones, S&P 500 and Nasdaq 100 also lost a lot at the end of last week.

Futures point to further declines as US equities open this afternoon. The S&P 500 lost 2.1 percent and the Nasdaq 100 lost 2.5 percent.

The Fed will raise interest rates

The recent drop in prices was caused by the US inflation data. As a result, inflation rose to 8.6% in May, the highest level in over 40 years. In addition, US consumer sentiment fell to its lowest level since 1980 in the face of high inflation. Declining consumer spending and higher interest rates increase fears that the United States may fall into a recession. Private consumption accounts for two-thirds of the gross domestic product of the world’s largest economy.

“After the US inflation rate fell in April, speculation increased that the peak had already passed,” wrote Commerzbank analyst Christoph Balz. It happened with the re-growth. High inflation may force central banks such as the Fed and the ECB to raise interest rates faster and faster than previously planned. This could slow down the economy.

Another Fed meeting on interest rates is scheduled for Wednesday, at which further monetary tightening is considered to be agreed. The decisive factor, however, is whether the currency keepers will accelerate the pace even more than previously expected. In early May, the Fed made the biggest interest rate hike in 22 years and raised its main interest rate by half a point to a new range of 0.75 to 1.0 percent.

Fed chairman Jerome Powell signaled similarly large hikes for Wednesday and July meetings. “Expectations for inflation and interest rates are supported again, especially as oil prices remain unexpectedly high and gasoline prices have increased additional momentum in recent weeks,” says Landesbank Hessen-Thüringen analyst Ralfcircul.

The Ministry of Economy warns of bottlenecks in supplies

And that’s not all: after the detection of a crown outbreak in Beijing’s most populous district, Chaoyang, authorities announced massive tests. It is quite likely that there will be another blockade, this time paralyzing much of the Chinese capital.

According to the Federal Ministry of Economy, the Chinese government’s “zero-Covid” strategy continues to pose a threat to the German economy, despite easing. “Although there has been a significant easing in Shanghai recently,” reads the monthly report released today. “But should blockages of this magnitude again occur in China, a worsening of supply bottlenecks and a further slowdown in world trade cannot be ruled out.” It should also be felt in Germany, after all, China is by far the most important trading partner of Germany.

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