Written by Amanda Cooper
LONDON, June 23 (Reuters) – Global stocks fell on Tuesday, led by a broad decline in technology stocks, as investors expected the Federal Reserve to take aggressive steps to tackle inflation, even after a 16% drop in oil prices this month.
The STOXX 600 fell 1.2%, under pressure from declines in European semiconductor and chip-equipment makers, which followed declines in tech stocks in Japan and South Korea, where Seoul’s KOSPI index fell 10% in its biggest one-day selloff since March.
Futures on the Nasdaq were down more than 2.5%, suggesting Monday’s 1.3% slide could extend into a second day. SpaceX shares on Monday lost nearly 17% after the company bought the bond market following its initial public offering earlier this month, while the likes of Alphabet, Meta Platforms and Microsoft also fell.
E-mini S&P 500 futures were down 1.5%.
“These are far from hidden markets,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “The former generals of the market seem to have lost power and investors are moving to other market areas that are more defensive, less focused on AI and offer more predictable cash flows.”
Brent crude futures settled below $76 a barrel for the first time since early March on Tuesday, as the number of ships passing through the Strait of Hormuz continued to build and oil prices in the virtual market nearly returned to pre-war levels.
A drop in oil would normally give stocks a boost, but investors are now focusing on what rising energy prices will mean for central bank policy and, in particular, the Federal Reserve. New chairman Kevin Warsh looks set to take a much harder line on inflation.
As such, the 2-year Treasury yield, which is the most responsive to changes in inflation expectations and rates, has hit a 16-month high to trade at around 4.188%, while long-term yields rose sharply.
“The high level of U.S. output creates a challenging backdrop for risk assets in the near term after strong gains in recent months,” said MUFG strategist Lee Hardman.
Financial markets are indicating that investors are close to a September rate hike. Against that backdrop, the dollar is at a one-year high against a basket of currencies.
Much of that strength came at the expense of the Japanese yen, which on Tuesday was as low as 161.47 against the dollar, as it neared a 40-year high in the previous day’s intense session.
Japan’s Finance Minister Satsuki Katayama said on Tuesday that he had an online meeting with US Treasury Secretary Scott Bessent the previous day to discuss global financial markets, which analysts say have raised the risk of formal intervention from Tokyo to prop up the yen.
