Stock markets struggle as worries grow about the economy

LONDON (Reuters) – European shares fell on Monday and Wall Street headed for a lower open, as investor sentiment struggled to recover from last week’s heavy selling amid fears of slowing economic growth.

Global stocks hit an 18-month low last week, as investors worried that higher interest rates to counter high inflation would hurt the global economy.

Unexpectedly weak economic data from China kept those concerns center stage on Monday. Retail sales in April fell 11.1% over the year, nearly double the fall forecast, as full or partial COVID-19 lockdowns were imposed in dozens of cities. Industrial output fell 2.9% when analysts were looking at a slight increase. Read more

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At 1104 GMT, the MSCI World Stock Index (.MIWD00000PUS), which tracks stocks in 50 countries, was up 0.1% on the day, struggling to recover from last week’s lows.

The European STOXX 600 Index is down 0.2% (.STOXX) while the London FTSE 100 Index is down steadily (.FTSE).

US stock index futures pointed to a lower open on Wall Street, with Nasdaq futures down 0.4% and S&P 500 futures down 0.3%.

“Inflation remains relatively high… It is something that keeps markets relatively anxious. Meanwhile, there is more tightening coming from central banks,” said Antoine Lissen, head of EMEA strategy and research at State Street at SPDR. .

“It’s hard to find a way to hedge against a stock drop in this context,” Lissen said.

He said some investors are looking to buy US dollars, gold or short-term fixed income.

European government bond yields are up, with Germany’s 10-year bond yield rising 4 basis points at around 0.988% – still below the eight-year high of 1.19% reached last Monday.

The European Central Bank at its next meeting is likely to decide to end its stimulus program in July, and raise interest rates “very soon” after that, ECB policymaker Pablo Hernandez de Cos said on Saturday. Read more

“Investors have shown that their focus is increasingly on the risks of a recession,” ING price strategists wrote in a note to clients.

ING said economic growth concerns could allow government bonds to act as safe havens.

“It will take a lot of optimism for the 10-year Treasury and the Bund to test 3% and 1% to the upside in our view,” they said.

At 1137 GMT, the 10-year yield in the US was 2.9130%.

The dollar index, which climbed last week to a 20-year high of 105.01, is down 0.1% on the day at 104.41.

The euro is nearing its lowest levels since 2017. Francois Villeroy de Gallo, policy maker at the European Central Bank, said a weaker euro could threaten the central bank’s efforts to steer inflation toward its target. Read more

Rising inflation and higher interest rates knocked US consumer confidence to an 11-year low in early May and raised the stakes for April retail sales scheduled for Tuesday. Read more

Meanwhile, UK inflation data released on Wednesday is expected to show prices rising 9.1% y/y.

Oil prices fell as investors took profits from the recovery in the previous session. Read more

Brent crude futures fell 1.1 percent to 110.29 dollars a barrel at 1121 GMT, while US West Texas Intermediate crude futures fell 1 percent to 109.44 dollars a barrel.

Bitcoin is trading at around $29,967. Last week it fell as low as $2,5401.05 – its lowest level since December 2020. Already hurt by a drop in risk appetite, the cryptocurrency sold off last week when the popular stablecoin, terraUSD, collapsed and lost its peg to the dollar.

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(Reporting by Elizabeth Hawcroft), Editing by Ed Osmond and Chizu Nomiyama

Our Standards: Thomson Reuters Trust Principles.

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