US stocks gave up their early gains on Monday afternoon after reports about slowing spending at tech group Apple reignited concerns about a potential recession.
The S&P 500, which had risen as much as 1 per cent earlier in the day, swung to a 0.8 per cent decline after Bloomberg reported that America’s most valuable company was planning to slow hiring and spending growth in some divisions. The Nasdaq Composite also slid 0.8 per cent.
Fears about a potential recession have been hanging over markets in recent weeks as the Federal Reserve struggles to tame inflation without pushing the US economy into contraction. Solid retail sales data provided some reassurance last Friday, but the report about Apple suggested worries are growing even at companies that have successfully weathered previous downturns.
Apple’s stock dropped 2 per cent, having climbed as much as 0.9 per cent earlier.
US stocks had begun the day brightly following strong gains in Europe and Asia. A broad FTSE index of Asia-Pacific shares rose almost 2 per cent after Chinese state media reported Beijing regulators were urging banks to finance developers in the wake of homeowners boycotting mortgage payments on unfinished houses.
Hong Kong’s Hang Seng index jumped 2.7 per cent, its biggest daily gain since late May, while the CSI 300 index rose 1 per cent. The Golden Dragon index of US-listed Chinese stocks climbed 2.5 per cent.
European markets also advanced, with the continent-wide Stoxx 600 up 0.9 per cent.
The moves followed an upbeat session for US stocks on Friday, as strong retail sales data and a survey hinting at easing inflation expectations tempered concerns about the Fed aggressively tightening monetary conditions with the economy slowing.
Unexpectedly strong US inflation data last week had stoked fears that the central bank could lift rates by an entire percentage point at its next policy meeting, but expectations had eased by Monday with futures markets implying an 81 per cent chance of a smaller 0.75 percentage point increase.
“The market is weak and when you get some slightly less bad news the market enjoys a moment of relief,” said Roger Lee, head of UK equity strategy at Investec.
However, he added that high inflation and the potential for recessions in the US and Europe meant global equities could have further to fall, despite the FTSE All World share index having dropped by a fifth this year.
“I don’t think investors fully appreciate that the performance you’ve seen in equities so far this year is all to do with interest rates, it’s not to do with potential earnings downgrades as we go into a slowdown,” said Lee.
In currency markets, the dollar index dropped 0.6 per cent as traders scaled back rate rise bets.
The euro, which fell below $1 last week for the first time in 20 years, rose 0.6 per cent to $1.014 ahead of a meeting of the European Central Bank on Thursday, at which it is expected to raise its deposit rate for the first time since 2011 to tackle record high inflation.
Government bond yields rose across European and American markets. The US 10-year Treasury yield climbed 0.06 percentage points to 2.99 per cent, while Germany’s 10-year Bund added 0.09 percentage points to 1.16 per cent. Yields rise when prices fall.