Global stocks fell on Wednesday as concerns over a slowdown in China added to questions about the global economic outlook.
Europe’s regional Stoxx 600 slipped 0.4 per cent in early dealings, while London’s FTSE 100 lost 0.7 per cent. Declines were more pronounced in Asian markets, with Hong Kong’s Hang Seng shedding 1.1 per cent and China’s mainland CSI 300 gauge dropping 1.9 per cent.
Real estate companies were among the largest fallers in Hong Kong, with property developer Logan Group dropping almost 50 per cent on Wednesday as trading of the stock resumed, having been suspended in May. Investors are pricing in almost $130bn in losses on Chinese property developers’ dollar debt on intensifying worries the country’s housing market will endure a protracted crisis unless the government steps in with a bailout.
The declines in equity markets on Wednesday also followed the release of a string of weaker than expected economic data for the US and Asia on Tuesday.
A survey of business activity for the US services sector fell to a 27-month low of 44.1 in August, down from 47.3 in July. A reading below 50 indicates contraction. A separate purchasing managers’ index for the Japanese manufacturing sector showed growth had slowed to its lowest level in 19 months.
The gloomy signals come as investors attempt to gauge how long rising costs, a drop in consumer spending and Covid-19 outbreaks in Asia will weigh on businesses.
The euro traded at $0.9954 against the dollar. The common currency had slipped below $1 again on Monday, having hit parity with the greenback in July for the first time in two decades.
In government debt markets, the yield on Germany’s 10-year Bund, seen as a proxy for borrowing costs across the eurozone, added 0.06 percentage points to 1.38 per cent as its price fell. US Treasuries were broadly flat.
Market participants were on Wednesday awaiting further clues about the future direction of the US Federal Reserve’s monetary policy, ahead of the central bank’s symposium starting on Thursday in Jackson Hole, Wyoming. Several traders said they expected the Fed to stick with its hawkish rhetoric.
Minneapolis Fed president Neel Kashkari, previously perceived as a more dovish US central bank policymaker, said on Tuesday night that the combination of “maximum employment” and “very high inflation” made the Fed’s approach “very clear: we need to tighten monetary policy to bring things into balance”.
Futures contracts tracking Wall Street’s S&P 500 slipped 0.3 per cent lower on Wednesday, after the broad equity gauge closed out a third consecutive day of losses on Tuesday.
Additional reporting by Oliver Telling
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