US stocks opened in the bear market on Monday, a decline of 20 percent from the peak in January, a sign of growing pessimism about the outlook for the economy.
Markets around the world fell, as higher-than-expected inflation and lower-than-expected economic growth increase the outlook for interest rates and corporate profits. Shares in Asia and Europe fell, investors dumped government bonds, oil prices fell and cryptocurrencies crashed.
The S&P 500 fell 2.5 percent at the stock exchange opening, as a sales wave continued. The S&P 500 dived briefly into the bear market̵[ads1]7;s territory last month, before returning to close just above it. The markets have been nervous since, with the S&P 500 last week recording its worst weekly loss since January.
The US benchmark stock index is now “within one bad day of moving a bear market, and stock futures suggest we have not seen all the negative sentiment expressed yet,” analysts at ING wrote in a note to investors Monday morning. The S&P 500 has fallen in nine of the last 10 weeks.
A report on Friday showed an increase in US inflation, which plagued markets, as investors worried that the Federal Reserve might have to raise interest rates higher and faster than expected to curb rising prices, a move that could hit the US economy.
Global investors sold stocks, bonds and other assets, as inflation is high in many countries, supply chains remain tight and economic growth forecasts are downgraded.
Asian stock markets closed deep in the red, with Japan’s benchmark Nikkei 225 falling 3 percent and South Korea’s Kospi falling 3.5 percent. In Hong Kong, equities fell 3.4 percent, while an index for China’s largest companies listed in Hong Kong fell 3.6 percent. The Japanese yen fell to a low of 24 years against the US dollar.
Fears in the region increased on Monday after officials in Beijing and Shanghai reintroduced measures for social distancing after another round of mass testing over the weekend. China’s economic growth has been hit by the country’s “zero Covid” pandemic policy, which left large parts of the country under some form of lockdown for several months earlier this year.
In Europe, the Stoxx 600 index was down 2.2 percent, reaching its lowest level since early 2021. Britain’s FTSE 100 fell 1.7 percent after news that the country’s economy shrank unexpectedly in April, and fell 0.3 percent from March . Economists had expected a small increase in growth.
European bond prices fell sharply as traders priced in a series of rate hikes from the European Central Bank while responding to high inflation across the eurozone. Yields on German and Italian government bonds, which are reversing prices, peaked in several years, indicating a sharp rise in borrowing costs.
Cryptocurrencies, which some believe can serve as a haven in times of inflation and turmoil, have also been hit hard. Bitcoin, the largest cryptocurrency, fell to an 18-month low of less than $ 24,000. It has lost about half of its value so far this year. The value of all cryptocurrencies fell below $ 1 trillion for the first time since early 2021, according to Coinmarketcap, down around $ 2 trillion from the top.