Global stock markets fall sharply amid fears over inflation and China slowdown

Global markets fell sharply on Monday as fears over rising inflation and a slowdown in China’s export growth fuelled worries about the health of the world economy.

Stocks in Asia-Pacific markets, Europe and the US all dropped into the red as investors fretted that global growth is weakening, at a time when central banks are raising interest rates to rein in surging inflation.

In London, the FTSE 100 fell to its lowest level in eight weeks, down 2.32% or 171 points to 7,216 at the close of trading on Monday, with mining companies among the fallers. Japan’s Nikkei had closed down 2.5% earlier on Monday.

Stocks slid after China’s export growth hit a near two-year low of 3.9% a year in April, down from 14.7% in March. Imports were flat, as China’s Covid outbreaks cut demand and disrupted manufacturing.

Analysts said the slowdown showed that the world’s second largest economy was suffering from the lockdowns in big cities such as Shanghai, which have affected factory production and snarled up logistics chains.

“Two of the biggest concerns are supply chains and the impact of inflation, including higher interest rates. As a result of severe Covid lockdowns, China’s export growth is at a two-year low,” said Mihir Kapadia, the chief executive of Sun Global Investments. “The supply chain disruptions will in turn impact earnings of companies around the world, and thereby their stocks.

European markets fell to a two-month low, down 2.9% at the close of trading. . In New York, the S&P 500 index dropped 2.3% by mid-afternoon trading on Wall Street – its lowest point in a year – after its worst streak of weekly losses in more than a decade.

Commodities weakened, with copper prices hitting their lowest since mid-December in London at $9,160 (£7,440) a tonne. Aluminium, zinc, nickel, lead and tin prices also dropped, on concerns that China’s restrictions are hitting manufacturing output.

Emerging market stocks hit their lowest level since June 2020, as China’s slowing economy added to pressures from rising global interest rates, and the ongoing disruption from the Ukraine war.

The Chinese premier, Li Keqiang, warned on Saturday that China’s employment situation was “complex and grave”, and called on government departments and regions to prioritise measures to support and retain jobs. That reinforced worries that China’s lockdowns are having a serious economic impact.

US government bonds were also hit by fresh selling, which drove up the yield, or interest rate, on the 10-year Treasury note to the highest since November 2018. Yields rise when prices fall.Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDeskhttps://www.theguardian.com/email/form/plaintone/business-today

The US dollar reached a fresh 20-year high, lifted by expectations of further sharp increases in US interest rates this year to tackle rising inflation, which is running at 8.5%.

“There’s no stopping the mighty US dollar,” said Marios Hadjikyriacos of the brokerage XM. “Stress in equity markets, worries about a synchronised global economic slowdown, and the relentless grind higher in US yields continue to drive up demand for the reserve currency.”

Risky assets such as cryptocurrencies were also hit. Bitcoin fell to its lowest level since July 2021, dropping below $32,700. It has lost half its value in the last six months.

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