(Bloomberg) — European stocks and US equity futures followed Asian shares lower after the latest data from China showed more weakness in the world’s second-biggest economy.
Most Read from Bloomberg
The Stoxx Europe 600 Index fell about 0.4% at the open, with all industry sectors in the red and real estate leading the decline. Contracts on the S&P 500 and Nasdaq 100 followed suit, suggesting US stocks may dip as markets reopen after the Independence Day holiday.
China’s sputtering services industry is raising concern about the outlook for global economic growth at a time when most major central banks are still in tightening mode. With more interest-rate hikes anticipated from the Federal Reserve and the European Central Bank in July, an aggregate gauge of borrowing costs calculated by Bloomberg Economics now shows a peak of 6.25% this quarter, up from 6% foreseen three months ago.
Fears that the US may be heading for a recession is sapping demand for equities after a stellar rally in the first half, driven mostly by mega-cap tech stocks. Traders will monitoring the minutes of the Fed’s latest policy meeting, which left Wall Street perplexed as officials paused their rate-hike cycle after 10 consecutive moves, but forecast two additional increases this year.
“It’s too early to say how deep the recession that is to come will be, but clearly a slowdown is coming,” Fabiana Fedeli, chief investment officer for equities and multi assets at M&G Plc, said on Bloomberg TV. “It’s too early to throw in the towel on risk assets whether in equities or credit. But at the same time you have to stay pretty high on the quality pole.”
A gauge of dollar strength was flat, while the yield on policy-sensitive two-year Treasuries drifted about two basis points lower to 4.92% as US bond trading resumed.
Initial losses in Chinese equities deepened and the offshore yuan reversed an advance after the Caixin China services purchasing managers’ index was weaker than expected. The yuan’s drop was also notable because it came despite the central bank earlier maintaining its support for the currency in its daily fix.
“This brings focus back on slowing growth momentum and the recent step-up in geopolitical angst,” Charu Chanana, market strategist at Saxo Capital Markets, said of the China services data.
The fading optimism over the outlook for China has also driven investors to lower their expectations for gains in Asian equities this year. A survey of 17 strategists and fund managers by Bloomberg News indicates MSCI Inc.’s Asia-Pacific Index may only rise about 5% by year end from Tuesday’s closing level.
Elsewhere, oil retreated after rallying on Tuesday on Saudi Arabian and Russian output cuts. Traders are waiting for potentially critical commentary from Saudi energy minister. Gold was little changed.
Key events this week:
-
OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
-
FOMC issues minutes on June policy meeting, Wednesday
-
New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
-
US initial jobless claims, trade, ISM services, job openings, Thursday
-
Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
-
US unemployment rate, nonfarm payrolls, Friday
-
ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
-
The Stoxx Europe 600 fell 0.4% as of 8:14 a.m. London time
-
S&P 500 futures fell 0.2%
-
Nasdaq 100 futures fell 0.4%
-
Futures on the Dow Jones Industrial Average fell 0.2%
-
The MSCI Asia Pacific Index fell 0.5%
-
The MSCI Emerging Markets Index fell 0.6%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro rose 0.2% to $1.0903
-
The Japanese yen was little changed at 144.61 per dollar
-
The offshore yuan fell 0.3% to 7.2482 per dollar
-
The British pound was little changed at $1.2720
Cryptocurrencies
-
Bitcoin was little changed at $30,813.75
-
Ether fell 0.2% to $1,937.58
Bonds
-
The yield on 10-year Treasuries was little changed at 3.86%
-
Germany’s 10-year yield was little changed at 2.46%
-
Britain’s 10-year yield advanced two basis points to 4.44%
Commodities
-
Brent crude fell 0.6% to $75.82 a barrel
-
Spot gold fell 0.1% to $1,923.55 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Allegra Catelli.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
