Europe Stocks Sink Most in Two Months; Metals Drop: Markets Wrap

A deluge of bad news swept across global markets on Wednesday, driving European stocks to the biggest loss in two months, pushing copper below $8,000 and snuffing out this year’s gains in China equities.

(Bloomberg) — A deluge of bad news swept across global markets on Wednesday, driving European stocks to the biggest loss in two months, pushing copper below $8,000 and snuffing out this year’s gains in China equities. 

There were reasons for investors to be pessimistic in every region. In the US, there was little progress in debt-ceiling talks and investors are increasingly worried about a default. China’s sputtering economy and worsening geopolitical ties also hurt sentiment. UK inflation came in higher than any economist prediction, fueling bets on further interest rate hikes. 

US futures dipped, signaling the S&P 500 will extend yesterday’s 1.1% retreat. European luxury stocks extended losses, with LVMH and Gucci owner Kering SA sliding about 2%. Real estate and carmakers slumped. 

“We expect a US recession,” said Janet Mui, head of market analysis at RBC Brewin Dolphin, in an interview on Bloomberg TV. “Interest rates will stay high in the US, contrary to what the market is currently pricing, so I think that is negative for the economy and corporate profits.”

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Treasuries rose, with the two-year yield falling two basis points to 4.3%. Traders are awaiting the release of Federal Reserve minutes from its May meeting later today, which may give a steer about whether the central bank will hold rates steady at the next meeting.

In Europe, the hot inflation print dashed any expectation that the Bank of England would pause on interest rates. Money markets are now pricing in a peak BOE rate as high as 5.5%, suggesting a full percentage point of hikes through the end of the year. 

The Stoxx 600 Index lost 1.7%, the biggest intraday loss since March 24. Gilts slid, with the yield on the 10-year note up five basis points at 4.21%. 

The standoff in Washington over debt limit talks has weighed on global market sentiment, with negotiators remaining far apart on key issues as time runs short to avert a historic US default. Economists project such an event would trigger severe consequences including a US recession. 

“We are pessimistic on the economic outlook,” said Michael Krautzberger, head of EMEA fundamental fixed income at BlackRock International. “The potential volatility coming from the debt ceiling discussion as we approach the deadline is one of those reasons. We don’t expect a technical default but we do expect a last minute deal.”

On the commodities front, metals were broadly lower. A new wave of Covid is threatening to set back China’s economy, and investors have been rattled by Beijing’s move to ban purchases of Micron Technology Inc.’s products. 

Copper’s demand weakness is evident in inventories held by the London Metal Exchange, which have almost doubled since mid-April. China’s benchmark stock index, the CSI 300 Index, closed down 1.4% Wednesday and the benchmark is among the worst performers in Asia this year. 

The New Zealand dollar dropped as much as 1.3% after the central bank unexpectedly signaled that no further policy tightening will be needed. Policymakers hiked interest rates to 5.5%, in line with projections. 

Key events this week:

  • Fed issues minutes of May 2-3 policy meeting, Wednesday
  • Bank of England Governor Andrew Bailey speaks, Wednesday
  • US initial jobless claims, GDP, Thursday
  • Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday
  • Tokyo CPI, Friday
  • US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Notice: NASB is for internal use only.



  • S&P 500 futures fell 0.3% as of 8:28 a.m. New York time
  • Nasdaq 100 futures fell 0.4%
  • Futures on the Dow Jones Industrial Average fell 0.3%
  • The Stoxx Europe 600 fell 1.7%
  • The MSCI World index fell 0.4%


  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.2% to $1.0793
  • The British pound fell 0.1% to $1.2399
  • The Japanese yen was little changed at 138.51 per dollar


  • Bitcoin fell 1.8% to $26,720
  • Ether fell 2% to $1,817.72


  • The yield on 10-year Treasuries declined two basis points to 3.67%
  • Germany’s 10-year yield declined four basis points to 2.43%
  • Britain’s 10-year yield advanced six basis points to 4.21%


  • West Texas Intermediate crude rose 1.4% to $73.91 a barrel
  • Gold futures rose 0.6% to $2,003.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Ruth Carson and Anchalee Worrachate.

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