US futures and European shares drifted lower, as a bigger-than-expected drop in Chinese exports stoked further concerns about the strength of global demand.
(Bloomberg) — US futures and European shares drifted lower, as a bigger-than-expected drop in Chinese exports stoked further concerns about the strength of global demand.
Signs of fading momentum in the world’s second-largest economy are weighing on sentiment globally, damping the optimism surrounding China’s reopening from pandemic restrictions earlier this year. Its exports to most destinations contracted in May.
Despite some optimism over potential stimulus, conviction on the China reopening trade has faltered, with sectors such as luxury goods among the hardest-hit. LVMH and Hermes International were set to decline for the third straight session on Wednesday.
“Weaker global trade is not a new story but it is surprising how quickly China’s reopening boost has faded,” said Craig Erlam, a senior market analyst at Oanda. “Pressure is set to intensify on the leadership to announce new stimulus measures in a bid to revitalize the economy again.”
Europe’s Stoxx 600 index ticked lower, while the FTSE 100 fell 0.2% after UK lender Halifax said the nation’s house prices posted their first annual decline since 2012.
Danske Bank shares gained as much as 5.3%, after it raised its key target for profitability and pledged dividends as the lender seeks to leave behind a turbulent period defined by scandals. Inditex SA rose as much as 5.7%, lifting the retail sector, after earnings from the Zara owner beat expectations.
In currency markets, Turkey’s lira slumped more than 5% to a record low against the dollar amid increasing signs that policy makers may be scaling back interventions to support the currency.
President Recep Tayyip Erdogan’s appointment of former Merrill Lynch strategist Mehmet Simsek as his new treasury and finance minister has sparked expectations of a return to more orthodox monetary policy and raised the prospect of reduced intervention in markets.
A gauge of greenback strength was little changed. Treasury yields were slightly higher after a treasury bill auction announcement weighed on short-dated US bonds on Tuesday.
Elsewhere, the Securities and Exchange Commission widened its sweeping crackdown on crypto by accusing Coinbase Global Inc. of running an illegal exchange, a move that could make it harder for the industry to operate and for US citizens to trade. Bitcoin slipped.
A rotation into financial shares Tuesday suggested the breadth of the S&P 500’s recent rally might extend beyond technology soon. While a decline in Apple Inc. crimped gains, the benchmark gauge still rose 0.2%, leaving it just short of a bull market.
In commodities, gold was little changed. Oil fell after giving up gains Tuesday off news of Saudi Arabia’s supply cut.
The World Bank said in a report Tuesday the global economy is in a precarious situation as sharp interest-rate hikes hit activity and stir vulnerabilities in lower-income countries. Those fears have suppressed equities.
But with the rate of US inflation still high, traders increasingly expect the Federal Reserve will hold rates steady at its June meeting, while keeping the option for hikes later on. Former vice-chair Richard H. Clarida also said Tuesday it was unlikely the US central bank will start cutting rates until 2024.
Key events this week:
- US trade, consumer credit, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventory data, Wednesday
- Eurozone GDP, Thursday
- Rate decisions in India, Peru, Thursday
- Japan GDP, Thursday
- US wholesale inventories, initial jobless claims, Thursday
- China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 4:10 a.m. New York time
- Nasdaq 100 futures fell 0.3%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index was little changed
- The MSCI Asia Pacific Index fell 0.1%
- The MSCI Emerging Markets Index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0686
- The British pound was little changed at $1.2417
- The Japanese yen rose 0.1% to 139.46 per dollar
- The offshore yuan was little changed at 7.1347 per dollar
Cryptocurrencies
- Bitcoin fell 0.6% to $26,795.93
- Ether fell 0.2% to $1,873.43
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.69%
- Germany’s 10-year yield advanced one basis point to 2.38%
- Britain’s 10-year yield was little changed at 4.21%
Commodities
- West Texas Intermediate crude fell 0.6% to $71.34 a barrel
- Gold futures fell 0.4% to $1,974.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Joanna Ossinger.
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