Global equities wobble as US data raises recession fear

NEW YORK – World stock markets wavered yesterday as investors dwelled on US recession concerns, while gold prices lingered near an all-time high, staying above US$2,000 (RM8,805) an ounce. 

On Wall Street, the Dow eked out a modest gain but the S&P 500 and Nasdaq both fell as more data added to recession concerns.

London rose but Frankfurt and Paris slipped in muted trade during a holiday-shortened week, while Asian indices slipped lower.

“Markets are drifting as investor thoughts start to turn towards the scale of severity, as the likelihood of a recession later in the year in the US increases,” said Richard Hunter, head of markets at trading firm Interactive Investor.

Investors view a recession as more likely following the latest batch of lacklustre US indicators, including a survey showing lower private sector hiring in March and a report indicating easing services sector activity.

Though the Institute for Supply Management’s services report was better than a manufacturing survey released earlier this week, “services ended last quarter on a weaker note and we anticipate a deterioration in conditions through the rest of the year”, said Oxford Economics.

But the weakening picture has added to questions on whether the US Federal Reserve will hold interest rates steady after a series of hikes to address inflation.

The central bank of New Zealand on Wednesday became the latest to hike interest rates sharply to tackle soaring inflation, a day after its peer in Australia paused its own monetary tightening campaign.

The Reserve Bank of New Zealand lifted its rate by a larger-than-expected 50 basis points to 5.25%.

“Central banks seem currently divided on whether inflation has peaked and therefore whether to tap on the tightening brakes,” Hunter said.

“The New Zealand decision is in contrast to the Australian decision to hold, and the market consensus is at the moment evenly split between whether the US Federal Reserve’s next move is a final 0.25 percentage point rise – or no action at all,” he added.

The price of gold, considered a safe bet in times of economic turmoil, lingered above the US$2,000 level, not far from a record US$2,075.47 set in August 2020.

“Investors fled to the yellow metal as a safe-haven play, given uncertainty about US growth expectations,” said TickMill Group analyst Patrick Munnelly. – AFP, April 6, 2023