European stocks followed Asian equities lower as disappointing data from China renewed concern over the nation’s fragile economic recovery.
(Bloomberg) — European stocks followed Asian equities lower as disappointing data from China renewed concern over the nation’s fragile economic recovery.
The Stoxx 600 dropped 0.7%, edging lower for the fifth day, and futures on US equities declined. The dollar strengthened against its Group-of-10 peers, while Treasuries slipped as cash trading resumed following a US holiday on Monday.
China’s services sector saw the slowest growth this year in August, an industry survey showed, adding to evidence the economic recovery is losing traction and damping earlier optimism over government stimulus measures. The MSCI Asia Pacific Index headed for its first drop in seven days, with Hong Kong shares leading the declines after dipping more than 1%. The offshore yuan weakened.
“It’s the typical post-party reality check that’s cooling down China’s rally today, as the services PMI notably missed expectations, suggesting further economic downtrend ahead,” said Hebe Chen, an analyst at IG Markets Ltd. in Melbourne.
At the same time, Country Garden Holdings Co. told creditors it paid coupons on two dollar bonds within their grace periods. The troubled developer that has come to symbolize China’s property woes is proposing to extend principal payments for eight yuan bonds as well, according to holders who said they were briefed by company advisers.
Traders now turn their focus to August PMI data from the euro area on Tuesday amid stagflation worries in the region. European Central Bank President Christine Lagarde in a speech on Monday avoided signaling whether policymakers will raise or hold interest rates next week.
Goldman Sachs Group Inc. lowered its estimate of US recession probability. “Continued positive inflation and labor market news has led us to cut our estimated 12-month US recession probability further to 15%, down 5pp from our prior estimate,” Jan Hatzius, its chief economist, wrote in a note.
Elsewhere, Brent crude slipped for the first day in six, trading down 0.3% at $88.71 per barrel. Expectations of further supply cuts from OPEC+ had driven prices to near the highest level since November. Gold fell.
Key events this week:
- Eurozone S&P Global Eurozone Services PMI, PPI, Tuesday
- US factory orders, Tuesday
- ECB President Christine Lagarde chairs panel focused on central banks and international sanctions at ECB Legal Conference, Tuesday
- Australia GDP, Wednesday
- Eurozone retail sales, Wednesday
- Germany factory orders, Wednesday
- US trade, Wednesday
- Canada rate decision, Wednesday
- Bank of England Governor Andrew Bailey testifies to the UK parliament’s Treasury Select Committee, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Boston Fed President Susan Collins speaks on the economy at New England Council, Wednesday
- China trade, forex reserves, Thursday
- Eurozone GDP, Thursday
- US initial jobless claims, Thursday
- Bank of Canada Governor Tiff Macklem to speak on the Economic Progress Report, Thursday
- New York Fed President John Williams participates in moderated discussion at the Bloomberg Market Forum, Thursday
- Atlanta Fed President Raphael Bostic speaks on economic outlook at Broward College, Thursday
- Japan GDP, Friday
- France industrial production, Friday
- Germany CPI, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.7% as of 8:20 a.m. London time
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The MSCI Asia Pacific Index fell 0.7%
- The MSCI Emerging Markets Index fell 0.8%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.3% to $1.0764
- The Japanese yen fell 0.3% to 146.90 per dollar
- The offshore yuan fell 0.3% to 7.2988 per dollar
- The British pound fell 0.3% to $1.2591
Cryptocurrencies
- Bitcoin fell 0.6% to $25,681.94
- Ether fell 0.4% to $1,620.96
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.21%
- Germany’s 10-year yield was little changed at 2.58%
- Britain’s 10-year yield was little changed at 4.46%
Commodities
- Brent crude fell 0.5% to $88.58 a barrel
- Spot gold fell 0.3% to $1,937.41 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Georgina McKay.
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