Global stocks slip on China data, European shares recover some ground

[August 16, 2023]  By Harry Robertson and Kane Wu

LONDON/HONG KONG (Reuters) - Global stocks slipped on Wednesday for the third time in four sessions as more disappointing Chinese economic data and the absence of meaningful stimulus from Beijing continued to weigh on investor sentiment.

European stocks and U.S. futures edged higher, however, after dropping sharply on Tuesday. Investors were waiting for minutes from the Federal Reserve's July meeting, due out later on Wednesday.

The MSCI World stock index was down 0.19% as of 0845 GMT. It was dragged lower by a sharp drop in Asian equities, with the MSCI Asia index, which excludes Japan, falling 0.98%.

"Much of the decline is explained by continuing concerns surrounding the economic slowdown in China, as well as rising tensions with the U.S.," said Thomas Gehlen, senior market strategist at Kleinwort Hambros.

Yet he added: "The news are not unanimously bad. After all, China is exporting deflation to the rest of the world."

China's new home prices fell for the first time this year in July, data showed on Wednesday, the latest in a string of downbeat numbers that point to a rapid loss in economic momentum.

On Tuesday, China reported weaker-than-expected July activity data. The Chinese central bank also unexpectedly lowered its policy rate on Tuesday, after a long run of disappointing figures and the arrival of deflation in July, but investors have so far been underwhelmed by the response.

Europe's STOXX 600 stock index rose 0.2% in early trading on Wednesday, but failed to recover Tuesday's 0.93% fall, which was driven by concerns about global inflation and China.

Germany's DAX was up 0.23% after losing 0.86% on Tuesday, while Britain's FTSE 100 slipped 0.09% following a 1.57% drop.

U.S. futures pointed to a brighter start on Wall Street, with S&P contracts up 0.24% and Nasdaq contracts 0.31% higher.

A man is reflected on an electric stock quotation board outside a brokerage in Tokyo, Japan April 18, 2023. REUTERS/Issei Kato

The S&P 500 fell 1.16% on Tuesday after stronger-than-expected U.S. retail sales data added to the pressure on the Fed to keep interest rates at high levels.

In currency markets, sterling picked up after data showed that Britain's inflation fell sharply in July but the core measure came in slightly higher than expected. Sterling was last up 0.46% at $1.276.

The dollar index, which measures the currency against six major peers, was down 0.22% at 102.98, ending a run of four straight daily increases.

Investors have bought the safe-haven dollar on the back of strong U.S. economic data and rising concerns about China. The euro was up 0.23% at $1.093.

Investors will get a sense of the Fed's thinking on interest rates at 1800 GMT (2 p.m. ET), when the minutes from July's decision are released. The Fed raised rates by 25 basis points to a 5.25% to 5.5% range at the meeting.

According to pricing in derivatives markets, traders think the Fed is probably finished with interest-rate rises.

"There's very little priced in for the September meeting and there's only 10 basis points priced in for the early November meeting, which I think is significantly underpricing the risks that there will be a rate hike at one of those two meetings," said Colin Asher, senior economist at Mizuho.

The yield on the 10-year U.S. Treasury note was down 3 basis points at 4.188% on Wednesday, after hitting a more than nine-month high of 4.274% in the previous session.

U.S. crude oil was down 0.19% at $81.15 a barrel, while Brent fell 0.20% to $85.06 a barrel.

Spot gold was up 0.15% at around $1,904.60 an ounce.

(Reporting by Harry Robertson in London and Kane Wu in Hong Kong; Editing by Lincoln Feast, Sam Holmes and Tomasz Janowski)

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