Data from China and Eurozone raise renewed concerns about economic outlook
06 September 2023 - 11:58
byNell Mackenzie and Kane Wu
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Global stocks fell on Wednesday after faltering growth in China and Europe heightened concerns about broader economic momentum, while the dollar firmed as investors weighed up the outlook for Federal Reserve interest rates.
MSCI’s broadest gauge of world stocks had slipped 0.1% by 8.45am GMT.
European stocks declined, extending losses for a sixth consecutive session, dragged lower by global economic slowdown fears and higher crude prices.
The pan-European Stoxx 600 index was at a week’s low of 0.8% by 8.45am GMT.
German industrial orders fell more than expected in July, the federal statistics office said. Eurozone construction PMIs and retail sales data is due later in the day.
In Asia, the Hang Seng index closed down 150 points and China’s benchmark CSI300 Index fell 0.22%, on expectations that China’s exports contracted at a slower pace in August.
Chinese investor sentiment also wavered after a private-sector survey on Tuesday showed services activity expanded at the slowest pace in eight months in August, reflecting weak demand.
“Key risks that could undermine equity sentiment in September include developments in China’s property market and potential increases in food and energy prices,” said Bruno Schneller, an MD at INVICO Asset Management.
China is also set to release lending and inflation data in coming days.
Another concern, Schneller said, was any deliberations on further oil production cuts, which could reignite inflationary concerns and dampen investor confidence.
Brent crude futures surpassed $90 a barrel on Tuesday after Saudi Arabia and Russia both said they would extend supply cuts to the end of 2023. Brent and West Texas Intermediate futures were down more than 60c, at $89.37 and $86.05, respectively.
Adding to the dour mood, manufacturing activity in Germany, Britain and the eurozone declined, while their service sectors fell into contraction territory.
“The Europe data was rather weak. We think there is still a high chance to have a mild recession in the US and Europe towards the end of the year or the beginning of next year,” said Redmond Wong, Greater China market strategist at Saxo Markets.
As the US returned from its Labor Day holiday, traders have been met with unusually high corporate bond issuance of more than $36bn due to hit the market this week, and $120bn of investment grade dollar-denominated issuance expected this month, Deutsche Bank strategist Jim Reid said.
“The pressure on US Treasury yields then comes as investors hedge the interest rate risk,” Reid said in a note.
US 10-year Treasury yields fell by as much as 2.6 basis points to a low of 4.242%, having touched a session high of 4.274%, the highest since August 25, while the dollar rose in earlier trading to a near six-month high against a basket of currencies.
Investors are digesting recent signals on potential US interest rate rises. Fed Governor Christopher Waller said on Tuesday that the latest round of economic data was giving the US central bank space to see if it needs to hike again.
The Institute for Supply Management (ISM) releases US services PMI on Wednesday.
Spot gold dipped 0.1% to $1,923.01 an ounce after posting its biggest one-day loss since August 1 on Tuesday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Global equities and bonds slide on growth jitters
Data from China and Eurozone raise renewed concerns about economic outlook
Global stocks fell on Wednesday after faltering growth in China and Europe heightened concerns about broader economic momentum, while the dollar firmed as investors weighed up the outlook for Federal Reserve interest rates.
MSCI’s broadest gauge of world stocks had slipped 0.1% by 8.45am GMT.
European stocks declined, extending losses for a sixth consecutive session, dragged lower by global economic slowdown fears and higher crude prices.
The pan-European Stoxx 600 index was at a week’s low of 0.8% by 8.45am GMT.
German industrial orders fell more than expected in July, the federal statistics office said. Eurozone construction PMIs and retail sales data is due later in the day.
In Asia, the Hang Seng index closed down 150 points and China’s benchmark CSI300 Index fell 0.22%, on expectations that China’s exports contracted at a slower pace in August.
Chinese investor sentiment also wavered after a private-sector survey on Tuesday showed services activity expanded at the slowest pace in eight months in August, reflecting weak demand.
“Key risks that could undermine equity sentiment in September include developments in China’s property market and potential increases in food and energy prices,” said Bruno Schneller, an MD at INVICO Asset Management.
China is also set to release lending and inflation data in coming days.
Another concern, Schneller said, was any deliberations on further oil production cuts, which could reignite inflationary concerns and dampen investor confidence.
Brent crude futures surpassed $90 a barrel on Tuesday after Saudi Arabia and Russia both said they would extend supply cuts to the end of 2023. Brent and West Texas Intermediate futures were down more than 60c, at $89.37 and $86.05, respectively.
Adding to the dour mood, manufacturing activity in Germany, Britain and the eurozone declined, while their service sectors fell into contraction territory.
“The Europe data was rather weak. We think there is still a high chance to have a mild recession in the US and Europe towards the end of the year or the beginning of next year,” said Redmond Wong, Greater China market strategist at Saxo Markets.
As the US returned from its Labor Day holiday, traders have been met with unusually high corporate bond issuance of more than $36bn due to hit the market this week, and $120bn of investment grade dollar-denominated issuance expected this month, Deutsche Bank strategist Jim Reid said.
“The pressure on US Treasury yields then comes as investors hedge the interest rate risk,” Reid said in a note.
US 10-year Treasury yields fell by as much as 2.6 basis points to a low of 4.242%, having touched a session high of 4.274%, the highest since August 25, while the dollar rose in earlier trading to a near six-month high against a basket of currencies.
Investors are digesting recent signals on potential US interest rate rises. Fed Governor Christopher Waller said on Tuesday that the latest round of economic data was giving the US central bank space to see if it needs to hike again.
The Institute for Supply Management (ISM) releases US services PMI on Wednesday.
Spot gold dipped 0.1% to $1,923.01 an ounce after posting its biggest one-day loss since August 1 on Tuesday.
Reuters
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