Key market trends and how Wall Street’s best minds are reacting to them. Delivered every weekday.
European stocks fell as a worsening economic slowdown in China overshadowed US inflation data, which reduced bets on the Federal Reserve’s approach to its first rate hike in the pandemic-era.
The regional Stoxx Europe 600 index lost 0.4 percent, while the UK’s FTSE 100 remained unchanged. Spain’s Capricorn was down 1 percent and France’s CAC 40 was down 0.6 percent.
The futures markets signaled that Wall Street’s S&P 500 stock index would tick 0.1 percent higher in early trading.
Tuesday data showed US consumer prices rose 0.3 percent in August versus July, a sharp slowdown from the previous month’s increase.
Asian markets, despite their sensitivity to US monetary policy, did not respond positively. The Hong Kong Hang Seng Index fell 1.8 percent in its third case session in a row and increased its loss to around 12 percent in the past three months. The CSI 300 index of mainland China stocks lost 1 percent.
Macau, the world’s largest gambling center, announced it would step up oversight of its gambling industry, which would slump casino operator stocks. The Beijing government has already introduced tough new rules for the technology sector, online gaming and private education.
China’s retail sales rose 2.5 percent in August from the same month last year, a report showed on Wednesday as the country dealt with outbreaks of the Delta variant of Covid-19. Economists polled by Reuters had expected growth of 7 percent.
On Tuesday, indebted Chinese home builder Evergrande hired restructuring consultants to help it through a liquidity crisis after monthly sales nearly halved from June to August.
“Chinese retail sales have been surprisingly weak due to the spread of Covid-19, holidays and a likely feeling that China’s debt-driven rise, partly fueled by real estate speculation, is coming to an end,” said Sebastien Galy of Nordea Asset Management.
“You are confronted with the fact that the global economy from China to the USA and possibly also in Europe is slowing a little faster than expected.”
A Bank of America survey of 258 wealth managers found that a net 13 percent expect global economic growth to spike, the lowest since April 2020.
U.S. retail sales declined an unexpectedly strong 1.1 percent in July versus June as consumers cut back on spending while delta coronavirus cases rose. Airlines have reported that demand is slowing while major employers from Microsoft to Ford have postponed plans to repatriate workers.
Oil prices remained untouched by slowdown fears, with Brent crude rising 1.3 percent to $ 74.55 a barrel after Hurricane Ida shut down US refineries.
The 10-year US Treasury bond yield slipped 0.01 percentage points to 1.271 percent after falling sharply on Tuesday as traders expected the Fed to take more time to consume its $ 120 billion monthly bond purchases move in the opposite direction to the prices.
The dollar index, which measures the US currency against six others, fell 0.2 percent. The euro gained 0.3 percent to buy $ 1.1829.