European stocks fell on Monday after sharp declines on Wall Street in the previous session, as weak economic data from China and the eurozone heightened fears over the outlook for global growth.
The regional Stoxx 600 gauge slid as much as 3% before paring losses to trade 1.4% lower. Markets in the UK were closed for a holiday, as were stock exchanges in Hong Kong and mainland China.
Monday’s selloff in European stocks came after a closely watched survey showed activity in China’s manufacturing sector slowed last month at the most severe pace since February 2020 as coronavirus shutdowns dealt a blow. to the country’s economy.
China’s official Purchasing Managers’ Index recorded 47.4 last month, down from 49.5 in March, data showed over the weekend. Any number below 50 signals a contraction.
The Caixin China General Manufacturing report, a private survey, also pointed to a faster slowdown in the country’s sprawling industry. “A further tightening of Covid-19 restrictions in China led to significantly faster declines in production and new business at the start of the second quarter,” the report said.
Meanwhile, the S&P Global eurozone factory PMI gauge fell to a 15-month low in April as the rate of output growth nearly stagnated.
“Manufacturing output virtually came to a standstill in the euro zone in April, with output simply growing at the slowest pace since June 2020,” said Chris Williamson, chief economist at S&P Global.
“Companies not only reported that ongoing component shortage issues had been compounded by the war in Ukraine and new lockdowns in China, but that rising prices and growing uncertainty about the economic outlook were also hitting demand” , added Williamson.
A sign of global economic concerns, Brent, the international oil benchmark, fell 2.1% to 104.83 dollars a barrel.
U.S. stock futures tracking the tech-heavy S&P 500 and Nasdaq 100 rose 0.5% and 0.6%, respectively, after declines of 3.6% and 4.2% for the S&P benchmark gauge and the Nasdaq Composite on Friday. The Nasdaq’s fall for April as a whole was 13.3%, marking its worst monthly decline since the depths of the global financial crisis in 2008. It was the worst month for the benchmark S&P since the market turmoil of early 2020.
The Nasdaq selloff in recent weeks has come amid traders stepping up bets on the US Federal Reserve tightening monetary policy to curb soaring inflation, which has hit 8.5% on an annual basis in March – its fastest music video in 40 years. . Ahead of the highly anticipated Fed monetary policy meeting on Wednesday, markets are pricing in a very large interest rate hike of half a percentage point, followed by hikes of the same magnitude in the next two meetings. The current range of key interest rates is between 0.25 and 0.5%.
Higher interest rates may dampen the appeal of more speculative companies, whose expected earnings streams have been flattered during the pandemic by low borrowing costs.
In government debt markets, the yield on the 10-year US Treasury note – seen as a proxy for borrowing costs around the world – added 0.06 percentage points on Monday to 2.94%. Bond yields rise as their prices fall.