(Bloomberg) — Treasuries rallied and equities were muted as growing signs of a global economic slowdown raised investor concern that the start-of-the-year rally in risk assets may have gone too far.
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Contracts on the S&P 500 Index were little changed after the benchmark slumped the most in a month Wednesday amid weaker-than-expected economic data. Nasdaq 100 futures were also little changed. Europe’s Stoxx 600 gauge halted a six-day rally. The 10-year Treasury yield declined to the lowest level since September. A selloff spread across global markets, from Japanese shares to oil contracts.
A rally driven by optimism over China’s economic reopening is beginning to fizzle as data releases signal a decisive slowdown in the rest of the world. Reports from the US showed declines in consumer demand and business investment, boosting the probability of a recession in the world’s largest economy. That, however, didn’t deter Federal Reserve officials from reaffirming the need for tighter monetary policy.
“This weakness in equity markets will continue a bit longer in this first quarter of the year as the market reprices what the Fed will do,” Sailesh Jha, the chief economist and head of market research for RHB Banking Group, said in an interview with Bloomberg Television.
Europe’s equity benchmark snapped the longest streak of gains since November 2021, dragged by energy and mining stocks. Australian bonds rose after the nation’s employment levels unexpectedly fell in December. New Zealand’s dollar fell 0.7% amid news Prime Minister Jacinda Ardern will step down next month.
Treasuries advanced across the curve, with the two-year yield shedding 4 basis points, while the 10-year rate fell 3 basis points. The dollar traded lower, with the Japanese yen contributing most to its losses.
In the US, Wednesday’s releases showed producer prices and retail sales fell, while business equipment production slumped. A decline in factory output wrapped up the weakest quarter for manufacturing since the onset of the pandemic. Even after…