Stocks fall as weak China data increases fears over global slowdown

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European and Asian stocks fell on Thursday as investors worried over the prospect of slowing global economic growth and high US interest rates.

Europe’s region-wide Stoxx 600 fell 0.5 per cent at the open, after six straight days of losses, while France’s Cac 40 was down 0.3 per cent and Germany’s Dax gave up 0.3 per cent. 

The downbeat mood spread from China after official data showed trade was weakening in the world’s second-largest economy. 

While not as bleak as analysts had forecast, China’s trade data on Thursday still showed exports falling 8.8 per cent year on year in August, while imports declined 7.3 per cent, in a sign that demand was slowing domestically and abroad. The benchmark CSI 300 and Hong Kong’s Hang Seng both fell 1.4 per cent.

“Periods of sticky inflation have dented real wages in western economies, while elevated level of interest rates have reduced their purchasing power via higher debt servicing costs,” said Kelvin Lam, senior China economist at Pantheon Macroeconomics.

“This coupled with the fizzling out of the post-Covid spending spree, resulting in weak demand for discretionary Chinese goods,” he noted.

While economic growth stumbled elsewhere in the world, US data earlier in the week revealed a flare-up in price pressures, adding to investor doubts that the Federal Reserve would begin to cut interest rates.

The US service sector had unexpectedly expanded in August, as consumers continued to spend despite the federal funds rate having climbed to a 22-year high over the past year. 

The data bolstered the belief that “even if the Fed is done with its rate hikes, it may need to hold its key interest rate for longer than previously expected if the economy continues to be this strong”, according to Karl Steiner, chief quantitative strategist at SEB Research.

The dollar, which tends to rise when investors expect higher rates, added 0.1 per cent against a basket of six currencies on Thursday, remaining near its highest level since March.

While the majority of market participants believe that the US central bank will keep rates steady at its meeting this month, some bet that another rate rise will follow later in the year. 

Contracts tracking Wall Street’s benchmark S&P 500 fell 0.3 per cent, while those tracking the tech-focused Nasdaq 100 declined 0.5 per cent ahead of the New York open, as traders prepared for a string of Fed policymakers to speak at a conference later in the day.

Oil prices steadied, as worries about slowing demand in China — the world’s top importer of the fossil fuel — overshadowed an earlier announcement of supply cuts from Riyadh and Moscow. 

Brent crude fell 0.3 per cent to trade at $90.37 a barrel, remaining near its highest level this year, while the US equivalent West Texas Intermediate dropped 0.4 per cent to $87.16 a barrel.