European stocks and oil retreated, while bonds rallied as more evidence pointed to a slowdown in China’s economy.
(Bloomberg) — European stocks and oil retreated, while bonds rallied as more evidence pointed to a slowdown in China’s economy.
LVMH and Hermes International lost more than 4%, leading declines among French luxury stocks and dragging the CAC 40 Index down 1.3%. Cartier owner Richemont sank 9% after reporting an unexpected drop in sales from the Americas.
After a week of historic stock-market gains, investors started Monday on a downbeat note after data that showed China’s growth for the second quarter missed estimates. The narrative that Chinese shoppers coming out of Covid lockdowns would be able to carry the global economy, despite rising US and European interest rates is looking increasingly shaky as economic reports continue to signal slowing momentum.
“China growth weakness has been brewing in the background for months,” said Pooja Kumra, senior European rates strategist at Toronto Dominion Bank. “Clearly growth has not been able to keep pace with expectations.”
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The MSCI ACWI of stocks worldwide dipped 0.1% on Monday after surging 3% last week. Shares in mainland China were the worst performers in Asia.
With its heavy dependence on the Chinese import market, European stocks are especially vulnerable. Companies tied to energy and raw materials together make up about 12% of the Stoxx Europe 600, and consumer discretionary industries account for 11%. JPMorgan Chase & Co. strategists expect further weakness in the region driven by lower bond yields as well as earnings disappointments.
Bonds extended a rally as investors looked to hedge any downturn in stocks and the economy. The yield on the 10-year Treasury fell five basis points to 3.77%.
Crude futures dropped 1.5% as traders weighed disappointing Chinese economic data and restarting Libyan supplies against signs of a tightening market.
In other commodity markets, wheat futures jumped after Russia terminated a grain-export deal, jeopardizing a key trade route from Ukraine, one of the world’s top grain and vegetable oil shippers.
Elsewhere, Activision Blizzard Inc. rallied 4% in US premarket trading after a US appeals court on Friday denied a Federal Trade Commission bid to pause Microsoft Corp.’s acquisition of the company.
The next pressure point for markets will be earnings, with hundreds of companies reporting over the next few weeks. S&P 500 firms are expected to post a 9% drop in profits in the second quarter, making it the worst season since 2020, according to data compiled by Bloomberg Intelligence. In Europe, it may be even worse, with a projected 12% slump.
Key events this week:
- G-20 finance ministers and central bankers are meeting in India, Monday
- European Central Bank President Christine Lagarde speaks, Monday
- US empire manufacturing, Monday
- US retail sales, industrial production, business inventories, cross-border investment, Tuesday
- Eurozone, UK CPI, Wednesday
- US housing starts, Wednesday
- China loan prime rates, Thursday
- US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
- Japan CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 7:03 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1231
- The British pound fell 0.1% to $1.3077
- The Japanese yen rose 0.5% to 138.15 per dollar
Cryptocurrencies
- Bitcoin fell 0.4% to $30,178.58
- Ether fell 0.9% to $1,911.99
Bonds
- The yield on 10-year Treasuries declined five basis points to 3.78%
- Germany’s 10-year yield declined five basis points to 2.46%
- Britain’s 10-year yield declined five basis points to 4.39%
Commodities
- West Texas Intermediate crude fell 1.1% to $74.44 a barrel
- Gold futures rose 0.1% to $1,961.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Viljoen and Ksenia Galouchko.
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