(Bloomberg) – China’s economic woes rippled beyond the country’s domestic markets on Wednesday, with European and Asian stocks falling along with U.S. stock futures, while bonds gained.
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Warmongering comments from Federal Reserve officials added to headwinds for stocks after a rally on Wall Street fueled by enthusiasm for artificial intelligence crumbled on Tuesday. Treasury yields fell and a dollar gauge gained for the first time in four days.
The Stoxx Europe 600 index headed for its lowest close since March, with China-exposed luxury goods makers LVMH and Richemont among the biggest laggards. Swedish owner SBB plunged as much as 11% to an all-time low after its CEO said its holding company had deferred interest payments on a loan. Heineken NV fell after Mexican bottler Femsa sold its stake in the Dutch brewer.
An indicator for Asian stocks headed for a two-month low after China reported the weakest reading in its Purchasing Managers Index since December. Hong Kong’s Hang Seng index fell more than 2%, with a bear market on the horizon. The offshore yuan hit its lowest level against the dollar in six months.
Stocks received some support from progress on the US debt ceiling talks and developments in artificial intelligence. But as a debt deal nears completion, investors are focused on inflation, economic growth and the path of interest rates, fearing that further bond sales by the Department of Treasury does not suck liquidity from other markets. China’s uneven recovery adds to concerns about the outlook for corporate earnings, particularly in Europe.
Copper extended its worst monthly loss in nearly a year and iron ore fell further below $100 a tonne as slowing manufacturing in China raised concerns about demand from the weakest economy. metal consumer.
The euro fell to a two-month low against the dollar after French inflation fell more than expected, hitting its lowest level in a year. Data from German states also signaled that inflation could fall faster than expected in the region’s largest economy.
Money market traders have reduced their bets on the trajectory of future European Central Bank interest rate hikes and no longer fully price another 50 basis points of hikes this year. German bonds rallied, with two- and five-year yields falling as much as 10 basis points.
AI exuberance
In Tuesday’s U.S. trading, the Nasdaq 100 added 0.4% to extend this year’s rise to 31%. Still, it ended its high for the day as investors assessed the artificial intelligence hype that boosted the index. Nvidia Corp. hovered around $1 trillion after announcing several AI-related products.
According to Cathie Wood, CEO and founder of Ark Investment Management, AI-related software vendors can now reap the benefits of Nvidia. “For every dollar of hardware sold by Nvidia, software vendors, SaaS vendors will generate eight dollars in revenue,” she said on Bloomberg Television.
Investors also remain focused on the debt limitation agreement reached by President Joe Biden and House Speaker Kevin McCarthy. The bill is heading for a vote in the House on Wednesday after clearing a crucial procedural hurdle with just days remaining to avoid a US default. Congress is rushing to pass the measure before June 5, when Treasury Secretary Janet Yellen warned the United States was at risk of default.
Meanwhile, Richmond Federal Reserve Chairman Thomas Barkin said he was looking for signs of slowing demand to be confident that US inflation would come down. Her Cleveland counterpart, Loretta Mester, said she saw no “compelling reason” to suspend interest rate hikes, especially in the wake of the debt limitation agreement.
Fed officials raised the central bank’s benchmark rate above 5% earlier this month and signaled they may be ready to pause the rapid tightening campaign they began last year. . Since then, stronger than expected economic data has bolstered market expectations for another rate hike in June.
Key events this week:
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U.S. job openings, Wednesday
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Federal Reserve Beige Book, Wednesday
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The Fed’s Patrick Harker, Susan Collins and Michelle Bowman speak at events on Wednesday
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Caixin China manufacturing PMI, Thursday
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Eurozone HCOB Eurozone manufacturing PMI, CPI, unemployment, Thursday
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U.S. Construction Spending, Initial Jobless Claims, ISM Manufacturing, Thursday
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ECB President Christine Lagarde speaks at a conference on Thursday
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The Fed’s Patrick Harker speaks during a webinar, Thursday
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U.S. unemployment, nonfarm payrolls, Friday
Some of the major movements in the markets:
Shares
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The Stoxx Europe 600 fell 0.2% at 9:24 a.m. London time
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S&P 500 futures fell 0.2%
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Nasdaq 100 futures fell 0.3%
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Dow Jones Industrial Average futures fell 0.2%
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The MSCI Asia-Pacific index fell 1.3%
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The MSCI Emerging Markets Index fell 0.9%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.6% to $1.0671
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The Japanese yen was little changed at 139.69 per dollar
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The offshore yuan fell 0.4% to 7.1221 to the dollar
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The British pound fell 0.4% to $1.2363
Cryptocurrencies
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Bitcoin fell 2.2% to $27,169.62
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Ether fell 1.8% to $1,870.49
Obligations
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The yield on 10-year Treasury bills fell three basis points to 3.65%
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Germany’s 10-year yield fell nine basis points to 2.25%
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The UK 10-year yield fell seven basis points to 4.17%
Goods
This story was produced with assistance from Bloomberg Automation.
–With the help of Winnie Hsu, Tassia Sipahutar and Eva Szalay.
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