Growth jitters knock global stocks before central bank-packed week
World shares fell while the dollar firmed on Monday as growth concerns tested investors’ mettle ahead of a week brimming with central bank meetings in countries including Norway, Sweden, Switzerland, Britain, the United States and Japan.
The pan European (.STOXX) index slipped 0.5%, dragged down by health care, bank and chip stocks.
Societe Generale (SOGN.PA), France’s third-biggest listed bank, saw its shares drop more than 6% and was set for its biggest one-day fall since March. The bank said it expected little if any growth in annual sales over the coming years in a keenly-awaited strategic plan from its new CEO.
China property woes, geopolitical tensions and ongoing strikes also stoked worries about global growth.
Shares of property developer China Evergrande Group (3333.HK) plunged 25% on Monday after police detained some staff at its wealth management unit. Fellow developer Country Garden 2007.HK faced yet another liquidity test with a deadline to pay $15 million in interest linked to an offshore bond.
Technology shares in the region retreated, with Taiwan’s TSMC (2330.TW), the world’s top contract chipmaker, falling 3% after Reuters reported that it has told its major suppliers to delay the delivery of high-end chipmaking equipment.
The disappearance of China’s defence minister heightened uncertainty about President Xi Jinping’s stance towards international engagement, worker strikes impinged on global production and the spectre of a U.S. government shutdown returned.
U.S. futures S&P 500 and Nasdaq edged up 0.1%.
“Bad news stories on the growth side will add to the risk averse feeling that has been a backdrop in markets,” said James Rossiter, head of global macro strategy at TD Securities in London.
TD Securities’ models predicted a slowdown in growth later this year that central banks might have to eventually counter by easing rates, said Rossiter.
“It’s only natural that markets would begin to test that,” he said.
MSCI’s broadest stock index (.MIWD00000PUS) declined 0.15% by 0830 GMT after European indices opened lower. Japan’s Nikkei (.N225) was closed for a public holiday.
Oil prices hit fresh 10-month peaks, further stoking inflationary pressures. Brent crude futures rose 27 cents to $94.19 per barrel and U.S. West Texas Intermediate crude futures gained 37 cents to $91.13, their highest levels since November.
Global central banks take centre stage, with five of those overseeing the 10 most heavily traded currencies holding rate-setting meetings this week. A swathe of emerging market central banks will also meet.
Markets are fully priced for a second straight pause from the Fed on Wednesday, with its targeted range expected to be unchanged at 5.25% to 5.5%, so the focus will be on the updated economic and rates projections. They see about 80 basis points of cuts next year.
“In theory, the FOMC meeting should be a low-volatility affair, but it is a risk that needs to be managed,” said Chris Weston, head of research at Pepperstone.
Weston added that if the Fed revises up its rate projections for 2024, that would see rate cuts being priced out, resulting in renewed interest in the dollar and downward pressure on global shares.
On Thursday, Bank of England is tipped to hike for the 15th time and take benchmark borrowing costs to 5.5%.
The Bank of Japan is the key risk event on Friday. Markets are looking for any signs that the BOJ could be moving away from its ultra-loose policy faster than previously thought, after recent comments by Governor Kazuo Ueda sent yields much higher.
U.S. Treasury yields edged higher in European trade, with the two-year above the 5% threshold.
In currency markets, the dollar was still standing strong near its six-month top at 105.29 against a basket of major currencies.
The euro gained about 0.1% to $1.0663, after slumping to a 3-1/2 month low of $1.0632 last week as the European Central Bank signalled its rate hikes could be over.
The price of gold rose 0.1% at $1,924.10 per ounce.