July 6, 2022

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European shares fall after China data added to growth problems

European shares fall after China data added to growth problems

LONDON (Reuters) – European stock indexes opened lower on Monday after oil prices tumbled and riskier currencies took a hit during the Asian session as unexpectedly weak economic data from China highlighted fears of slowing growth.

China’s retail sales in April fell 11.1% year on year, nearly double the fall forecast, as 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

Investors are concerned that interest rate-pushing inflation will hurt the global economy. These concerns last week saw global stocks reach an 18-month low.

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At 0732 GMT, the MSCI . World Stock Index was released (.MIWD00000PUS.)which measures stocks in 50 countries, was flat on the day, but still above last week’s lows.

The European STOXX 600 Index fell 0.5% (.stoxx) The FTSE 100 in London was down 0.4%. (.FTSE).

“This week’s calendar of events is relatively calm, so markets are more than ever at the mercy of headlines regarding the global growth outlook,” ING price strategists wrote in a note to clients.

“Despite the already bleak risk sentiment, we believe investors have demonstrated that their focus is increasingly on downside risks.”

European government bond yields were slightly higher, with Germany’s 10-year bond yield up 3 basis points at around 0.974% – below an 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

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safe havens

ING analysts said economic growth concerns could allow government bonds to act as a safe haven.

“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 0741 GMT, the 10-year yield in the US was 2.9221%.

The dollar index, which climbed last week to a 20-year high of 105.01, is down less than 0.1% on the day at 104.47. Riskier currencies, such as the Australian dollar and the British pound, fell.

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

UK labor market data is due on Tuesday and UK inflation data is due on Wednesday.

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

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

Brent crude futures fell 1.2 percent to $110.26 a barrel at 0755 GMT, while US West Texas Intermediate (WTI) crude futures fell 0.8 percent, as low as $109.59 a barrel.

Bitcoin was trading around $29.532. It fell last week to $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 dollar peg.

(Reporting by Elizabeth Hawcroft) Editing by Ed Osmond

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