Wall Street: Worries Take Over

(CercleFinance.com) – Wall Street is expected to continue its downward trend Thursday morning, with concerns about the health of the economy once again prevailing over the temptation to shop for bargains.

Half an hour before the open, futures contracts on New York’s major indices fell about 1%, signaling a lower open after the previous day’s fall.

Wall Street ended sharply lower last night, with the Dow Jones falling 3.6% and the Nasdaq falling 4.7%, in a context of risk aversion fueled, among other things, by concerns about China’s health situation and the consequences of it for the economy.

As of Thursday, the general environment remains dominated by fears about global growth, with the prospect of a recession appearing to be intensifying by the day in the United States and growth in Europe also looking threatened.

Investors fear that central bank efforts to contain inflation are about to trigger a recession.

“We believe that the risk of a recession is very real,” emphasize the RBC economists.

Consumer confidence is in free fall, PMIs (particularly in China) have fallen and there is now a clear risk of recession or stagflation in major economies.

As such, the most recent economic indicators published in the United States are not encouraging.

The Philadelphia Fed Index fell 15 points to 2.6 in May, its lowest level in two years.

On the labor market side, the number of weekly registrations for unemployment benefits rose to 218,000 in the week of 9 May, from 197,000 a week earlier.

Fears of a recession, currently hitting the world’s largest economy, are pushing 10-year government bond yields below 2.80% as investors look for assets deemed safe.

All global equity markets are affected by fears of slowing growth. At the opening of Wall Street, European stocks were also in the red, with losses of 1.7% in Frankfurt and more than 2.3% in London.

In this bleak environment, however, some analysts believe the worst stock market correction could be over.

“The good thing is that US stock markets have now fallen as much as they usually do when going through a recession,” said one of Capital Economics.

“So that means there’s huge upside potential if, as we think, the US economy bends, but doesn’t break,” the researcher concluded.

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