European stocks fell as weak Chinese data exacerbated the problems of the recession

By Wayne Cole SYDNEY (Reuters) – Asian share markets were attempting a rare rally on Monday after Wall Street managed a bounce from deep lows, though investors were also braced for bad news from Chinese economic data due later in the session.

European stocks fell: European shares fell on Monday, with French and German stocks losing up to 1% each, as alarmingly weak economic data from China fanned global recession fears.

China’s April retail sales plunged 11.1%, almost twice the fall forecast, while industrial output dropped 2.9% when analysts had looked for a slight increase, adding to fears that the world’s second-biggest economy could contract this quarter amid COVID-19 lockdowns.

The pan-European STOXX 600 index fell 0.4% by 0801 GM ..

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

China’s April retail sales plunged 11.1% on the year, almost twice the fall forecast, as full of partial COVID-19 lockdowns were imposed in dozens on cities. Industrial output dropped 2.9% when analysts had looked for a slight increase.

Investors are worried that inflation pushing up interest rates will damage the global economy. These fears saw global shares hit their lowest point in 18 months last week.

At 0732 GMT, the MSCI world equity index, which tracks shares in 50 countries, was flat on the day, but still holding above last week’s lows.

Europe’s STOXX 600 was down 0.5% while London’s FTSE 100 was down 0.4%.

European stocks fell

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

“Despite gloomy risk sentiment already, we think investors have shown that their focus is increasingly on recession risk.”

European government bond yields were a touch higher, with Germany’s 10-year yield up 3 basis points at around 0.974% – below the roughly eight-year high of 1.19% it reached last Monday.

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

SAFE HAVENS

Concerns about economic growth will allow government bonds to act as low-risk, safe-haven investment, ING analysts said.

“It would take a lot of optimism for 10Y Treasuries and Bund to test 3% and 1% to the upside in our view,” they said.

At 0741 GMT, the U.S. 10-year yield was at 2.9221%.

The dollar index reached 105.01 last week, reaching its highest level in 20 years.
It fell less than 0.1% per day to 104.47. More risky currencies such as the Australian dollar and the British pound fell.

The euro was near its lowest since 2017. ECB policymaker Francois Villeroy de Galhau said the euro’s weakness could threaten the central bank’s efforts to steer inflation towards its target.

UK labour market data is due on Tuesday and UK inflation data will be out on Wednesday.

Sky-high inflation and rising interest rates drove U.S. consumer confidence sink to an 11-year low in early May and raised the stakes for April retail sales due on Tuesday.

Oil prices slipped as investors took profit from a recovery in the previous session.

Brent crude futures were down 1.2%, at $110.26 a barrel at 0755 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 futures were 0.8%, lower at $109.59 a barrel.

Bitcoin was trading at around $29,532. Last week it plunged to as low as $25,401.05 – its lowest since December, 2020. Already hurt by declining risk appetite, cryptocurrencies sold off last week when a popular stablecoin, TerraUSD, collapsed and lost its dollar peg.