Shares fall, oil jumps in a shaky start to the fourth quarter

LONDON, Oct 3 (Reuters) – The final quarter of the year got off to a shaky start on Monday, with world shares weakening to their lowest levels since late 2020 – as the global economy continued to suffer from the Covid-19 pandemic.

Oil prices rose more than 4% as the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, said they would consider cutting output, while the pound rose after the British government said it would reverse a controversial tax cut that had rocked . UK markets.

But sentiment across markets remained fragile given concerns that aggressive rate hikes by the likes of the US Federal Reserve are raising the risk of a global recession.

European stock markets were a sea of ​​red, with the STOXX 600 index down 1.4% (.STOXX). Shares in beleaguered Swiss bank Credit Suisse ( CSGN.S ) fell around 10% in early trade, reflecting market concerns for the group as it completes a restructuring program to be announced on Oct. 27.

Asian shares mostly fell in holiday-thin trade, although Japanese markets found support in strong energy and semiconductor shares (.N225).

U.S. stock futures were mixed and MSCI’s world stock index (.MIWD00000PUS) fell to its lowest level since late 2020.

Even the news of the UK government’s tax u-turn did not seem to lift wider sentiment.

Stephen Innes, managing partner at SPI Asset Management, said last week’s meltdown in UK markets, following the UK’s “mini budget” on September 23, suggested a bear market in shares had entered a new phase.

“Market fragility heading into Q4 means it’s time to get comfortable with being uncomfortable,” he said.

“Coming out of more than a decade of cheap money and liquidity injections was always going to be difficult. But the Fed has not blinked in the face of falling stock markets, quite the opposite.”

MSCI’s world stock index of 47 countries rose 10% between July and mid-August. But aggressive Fed rate hikes soon returned, and that index has plunged 15% since, leaving it down 25% and $18 trillion so far this year.

Central banks in Australia and New Zealand meet this week and are expected to deliver further rate hikes.

Oil prices rose on reports that OPEC+ this week will consider cutting output by more than 1 million barrels a day, for the biggest cut since the pandemic, in an effort to support the market. Brent crude futures rose more than 4% to nearly $89 a barrel, and US West Texas Intermediate crude rose 4.5% to $83 a barrel.

UK BREATHE

The British pound rose around 0.5% to $1.1200 and government bond yields fell, pushing up prices after the UK’s policy reversal .

“From a market perspective, it’s a good step in the right direction. It will take time for the markets to buy the message, but it should ease the pressure,” said Jan Von Gerich, chief analyst at Nordea. “Questions still remain and sterling is likely to remain under pressure.”

London’s FTSE-100 share index fell 1% (.FTSE), falling in line with other markets.

Japan’s yen, meanwhile, fell as low as 145.4 to the dollar even as Japan’s finance minister, Shunichi Suzuki, said the government would take “decisive steps” to prevent sharp currency moves.

It was the first time the yen has fallen through the 145 barrier since September 22, when Japan stepped in to prop up the currency for the first time since 1998.

Trade across Asia was generally subdued. South Korea had a national holiday and China entered its “Golden Week” break on Monday. Hong Kong is closed for a public holiday on Tuesday.

Gold was just 0.3% firmer at $1,664 an ounce.

Reporting by Dhara Ranasinghe, additional reporting by Sam Byford in TOKYO; Editing by Hugh Lawson

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