Global Markets Extend Losses After FedEx and World Bank Warnings

Barry Adams
16 Sep, 2022
New York City

Stocks on Wall Street traded sharply lower on the worries of global economic slowdown and rate increases yet to come. 

The World Bank in its latest report said that the global economic slowdown is accelerating at the fastest pace since the early seventies and several recession indicators are flashing warning signals. 

The multilateral bank also said that the global economy is expected to plunge into a recession in 2023 as central banks around the world lift interest rates. 

In addition, the U.S. dominated institution also cited that despite the higher interest rates inflation is likely to stay elevated on the persistent supply chain problems. 

The mood also soured in financial markets after FedEx said its global shipments declined in the last two months at a pace higher-than-expected and the global parcel delivery company also withdrew its fiscal 2023 earnings outlook. 

 

Can We Tame Inflation and Avert a Recession?

Investors are increasingly accepting the scenario that high inflation can not be tackled without the high interest rates and the longer the Fed takes in lifting rates to or above 5% the longer the economic slowdown or even a recession will last.  

 

Why Wall Street Opened Lower 

The two separate reports put investors on alert and stock market indexes closed down in Asia and extended weekly losses in Europe. 

Stocks on Wall Street extended weekly losses and two popular indexes are set to close down between 4% and 6% for the week.  

The S&P 500 index declined 1.1% to 3,854.06 and the Nasdaq Composite index dropped to 1.5% 11,381.79. 

Crude Oil futures increased $1.10 to $86.04 and natural gas fell to 35 cents to $7.96 a thermal unit.

 

Bond Yields Advance Ahead of Fed Meeting Next Week 

The bond yields continue to trade higher with 2-year Treasury notes trading near 15-year high and ahead of 30-year Treasury bonds indicating that the bond market is forecasting a recession or an economic slowdown in the coming quarters. 

The yield on 2-year Treasury notes hovered near 3.89%, 10-year notes traded at 3.42% and 30-year bonds  at 3.48%. 

 

European Markets Head Lower

In Europe, benchmark indexes also extended losses and bond yields rose on the persistent worries of economic slowdown and deepening energy crisis. 

The DAX index fell 1.3% to 12,788.31, the CAC-40 index dropped 0.9% to 6,104.77 and the FTSE 100 index fell 0.3% to 7,259.25. 

 

Pound at 37-year Low 

The U.K. pound declined to a 37-year low of $1.14 as latest economic data point to economic slowdown and weakening activities. 

Retail sales in the U.K. dropped 1.6% on a monthly basis in August, the largest monthly decline so far in the year after a 0.4% rise in July, the Office for National Statistics reported Friday. 

 

Eurozone August Inflation Reaffirmed 

The Eurozone inflation was unrevised in the final estimate at 9.1% in August according to the Eurostat report released on Friday.

The inflation[s previous estimate was released on August 31 and the rate accelerated from 8.9% in July.  

 

Russia Cuts Rate Again 

The Central Bank of Russia lowered its key lending rate by 50 basis points to 7.5%, matching the expectations. 

The central bank lowered the rate for the sixth time in a row but guided 2022 inflation to range between 11.0% and 13.0% before cooling down to between 5.0% and 7.0% in 2023.