Tuesday saw declines in US stock futures, European stock futures, and the euro against the dollar, which also fell as concerns about the state of the world economy grew.
Following a positive opening, the regional Stoxx Europe 600 equity index fell 0.5%, while the FTSE 100 fell 0.9%. In Asia, mainland China's CSI 300 fell 0.1% while Hong Kong's Hang Seng closed up 0.1%, erasing earlier gains.
The euro fell almost 1.4% against the dollar to $1.0279, its lowest level since 2002, signaling worsening sentiment regarding the outlook for economic growth.
Euro-dollar parity "looks almost inevitable now," according to Vasileios Gkionakis, head of European FX strategy at Citi, who also noted that the euro's decline was being fueled by the possibility of further declines for European stocks and a sharp increase in natural gas prices.
As news broke that Norway's Equinor was temporarily closing three oil and gasfields because workers went on strike, futures contracts linked to TTF, the European wholesale gas price, increased 8% to a four-month high.
The head of macro and dynamic allocation at Unigestion, Guilhem Savry, predicted that stock markets would continue to decline. "TThe recessionary theme has made a comeback," he declared. "Although markets are now starting to price in a cooling of inflation and central bank hawkishness, we have yet to reach the lows in equity markets where we would be comfortable to re-engage risk."
With US markets set to reopen on Tuesday after a holiday, futures contracts tracking Wall Street's S&P 500 and the Nasdaq 100 saw losses of 0.5 and 0.7 percent, respectively.
The yield on the 10-year German Bund, which is used as a proxy for borrowing costs throughout the eurozone, decreased 0.05 percentage points to 1.29 percent on the government debt markets. To 0.54 percent, the two-year yield decreased by 0.09 percentage points. As bond prices increase, bond yields decrease.
Early this year, as the European Central Bank and the US Federal Reserve signaled aggressive interest rate increases and the intended withdrawal of significant bond-buying programs in an effort to combat soaring inflation, yields on Bunds and Treasury notes had climbed higher.
The Federal Reserve increased its benchmark rate by 0.75 percentage points in June, the most since 1994.
But due to mounting evidence of an economic slowdown, investors have recently reduced their expectations for how high the world's most powerful central bank will increase borrowing costs in the coming months.
The minutes from the Fed's most recent monetary policy meeting, which are scheduled to be released on Wednesday, could provide additional information about how much the central bank is prepared to tighten monetary policy. A closely watched US jobs report on Friday will also show how hot the labor market is in the nation, a factor that could also affect Fed policy.
The bond markets rallied after a somber report on America's factory sector increased concerns about the economy, and the S&P closed higher on Friday, the last trading day before the long weekend.
By fLEXI tEAM