Stocks in Europe fell along with US equity futures as poor Chinese economic data fueled concerns about the global outlook, pouring cold water on last week’s brief revival of risk sentiment.
The Stoxx Europe 600 index dropped about 0.6% at the open, led lower by travel and personal-care stocks. Telecoms advanced as Vodafone Group Plc climbed after Emirates state-backed firm e& bought a 9.8% stake, becoming the group’s largest shareholder. Contracts on the S&P 500 and Nasdaq 100 declined.
An Asia-Pacific share index came off sessions highs, the dollar firmed and oil slid, pointing to a fresh bout of investor caution after Chinese data showed that industrial output and consumer spending hit the worst levels since the pandemic began, hurt by Covid lockdowns.
In the bond market, the 10-year US yield dropped to around 2.89%. A key question is whether economic worries will help stem this year’s Treasury selloff, which has been driven by inflation and tightening US monetary settings.
Cryptocurrencies dipped as the mood in stocks weakened. That took Bitcoin back below the $30 000 level.
The risk of an economic downturn amid price pressures and rising borrowing costs remains the major worry for markets. Goldman Sachs Group Inc. Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.” Many traders remain wary of calling a bottom for equities despite a 17% drop in global shares this year.
Volatility that saw the S&P 500 dip to a 13-month low last week before rebounding “is a reminder that for most investors, trying to time the market is likely to prove time-consuming and loss-making,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Investor sentiment is fickle, and markets are likely to remain choppy until we get greater clarity on the three Rs: rates, recession, and risk.”
Food and fuel prices are feeding into rising costs. Wheat jumped by the exchange limit on India’s move to curb exports.
Oil was dented by the Chinese figures but remains in sight of $110 a barrel. Shanghai is close to the necessary threshold for loosening its six-week lockdown, a development that could spur bets on rising energy demand. Officials are taking measured steps to help the economy: China effectively cut the interest rate for new mortgages over the weekend to bolster an ailing housing market, but the one-year policy loan rate was left unchanged Monday.
Traders are also waiting to see how European markets react to efforts by Finland and Sweden to join the North Atlantic Treaty Organisation in the wake of Russia’s invasion of Ukraine.
The shift in Europe’s security alliance could exacerbate tensions with Russia. European equity futures edged lower.
What to watch this week:
- New York Fed President John Williams speaks Monday
- Fed Chair Jerome Powell among slate of Fed speakers. Tuesday
- Reserve Bank of Australia releases minutes of its May policy meeting. Tuesday
- G-7 finance ministers and central bankers meeting. Wednesday
- Eurozone, UK CPI. Wednesday
- Philadelphia Fed President Patrick Harker speaks. Wednesday
- China loan prime rates. Friday
Some of the main moves in markets:
- The Stoxx Europe 600 fell 0.6% as of 8:15 a.m. London time
- Futures on the S&P 500 fell 0.8%
- Futures on the Nasdaq 100 fell 1%
- Futures on the Dow Jones Industrial Average fell 0.6%
- The MSCI Asia Pacific Index rose 0.1%
- The MSCI Emerging Markets Index rose 0.1%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0408
- The Japanese yen rose 0.2% to 128.96 per dollar
- The offshore yuan fell 0.3% to 6.8176 per dollar
- The British pound fell 0.3% to $1.2225
- The yield on 10-year Treasuries declined three basis points to 2.89%
- Germany’s 10-year yield was little changed at 0.94%
- Britain’s 10-year yield declined one basis point to 1.73%
- Brent crude fell 1.4% to $110.02 a barrel
- Spot gold fell 0.1% to $1 809.20 an ounce