Stocks diverge, oil extends losses

European stock markets rebounded Tuesday, Asian equities mostly sank and oil prices tumbled as traders reacted to fears over rising US interest rates fuelled by surging inflation and assessed the impact of China's prolonged Covid lockdowns.

World stock markets have been on a tempestuous ride this year, with Wall Street suffering another hit on Monday as the tech-rich Nasdaq slumped more than four percent, while the S&P 500 ended below 4,000 points for the first time since March 2021.

That followed hefty declines Monday in Europe, although key indices in Frankfurt, London and Paris had recovered some of those losses by the half-way stage Tuesday.

"After yet another miserable session in the US yesterday, Europe and pockets of Asia managed to... push ahead," noted Russ Mould, investment director at AJ Bell.

Investors were worried "about inflation, rising interest rates, a slowdown in the world economy, war in Ukraine, new Covid flare-ups in China, weakness in consumer spending and concerns that business investment might take a back seat", he added. o Bitcoin woes Bitcoin on Tuesday slumped briefly under $30,000, reaching a 10month low.

The volatile cryptocurrency has lost more than half its value since a November surge saw it reach a recordhigh of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

Data on Tuesday showed inflation in Greece jumping by 10.2 percent in April, its highest level since 1995, while it reached its highest rate since 1984 in Denmark at 6.7 percent.

Inflation began to rise after countries emerged from Covid pandemic restrictions last year, but it worsened following Russia's invasion of Ukraine, which pushed energy and food prices even higher.

The Ukrainian economy is set to contract by almost one third this year in the wake of Russia's invasion, the European development bank said.

Ukraine output is set to contract 30 percent compared with an EBRD forecast of minus 20 percent given in March shortly after Moscow's military offensive.

Elsewhere Tuesday, oil prices fell further but the losses were less severe than the drops of more than six percent

Monday on weaker demand concerns.

Hong Kong stocks fell by more than 3 percent on Friday morning on US rate fears and following a massive sell-off from Wall Street.

The Hang Seng Index dropped by 3.31 percent, or 688.36 points, to 20,105.04.

The sell-off was New York's worst since 2020, and sent jitters across US markets.

The Nasdaq-dominated by tech firms particularly sensitive to higher rates-lost five percent while the Dow and S&P 500 fell more than three percent.

Traders were scared off by even a suggestion of fierce monetary tightening by the US central bank, which is struggling to contain inflation running at a more than four-decade high.

US authorities on Wednesday arrested Archegos founder Bill Hwang and charged him with securities fraud and market manipulation following the fund's spectacular implosion last year that cost large banks billions of dollars.

The family-owned hedge fund run by Hwang had taken huge bets on a few stocks with money borrowed from banks, and when several of those bets turned sour, the fund was unable to meet "margin calls" to cover the losses.

The 2021 collapse of the fund sent shockwaves through financial markets and caused $10 billion in losses for Credit Suisse, Nomura, Morgan Stanley and other leading financial institutions.

Hwang and Patrick Halligan, chief financial officer of Archegos, were both arrested by the FBI early Wednesday. -REUTERS