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Stocks and bonds stumble due to growth concerns.

ReutersSeptember 6, 2023

Wall Street‌ Open Reflects Global Stock Declines Amid Economic Concerns

By⁤ Nell Mackenzie

LONDON (Reuters) – The Wall Street open was set to mirror global stock declines on Wednesday after ⁤faltering growth in China ⁣and⁣ Europe heightened concerns about broader economic momentum, as⁣ investors weighed up the outlook for Federal Reserve interest rates.

S&P and Nasdaq futures traded ⁤0.2% and ⁤0.3% ⁤down, while MSCI’s broadest gauge of world stocks ‌had slipped 0.1% by 1045 GMT. ‌

European stocks extended losses for a sixth consecutive session, dragged lower by global economic slowdown fears and higher crude‍ prices.

The ‌pan-European⁣ STOXX⁣ 600 ⁤index traded down⁢ 0.7% ‌after⁤ hitting a ⁣week ‍low of 0.8%.

German industrial orders fell more than expected in July, the federal statistics office said. Euro zone construction PMIs and retail⁣ sales data are due later in⁣ the day.

In‍ Asia, the Hang Seng Index ⁢closed down 150 points‍ and China’s benchmark CSI300 Index fell 0.22%, ahead‍ of⁤ expectations ‍that China’s exports contracted at ⁣a slower ⁢pace in August.

Chinese investor sentiment also wavered‌ after a private-sector survey on Tuesday showed services⁢ activity expanded ⁤at ‍the slowest pace in eight months⁣ in August, reflecting weak demand.

“Key risks that⁣ could undermine equity sentiment ‍in ⁢September include‍ developments in China’s property market‍ and potential increases in food and ‍energy prices,” said Bruno Schneller, a managing director at INVICO Asset Management.

China ‌is also set to release lending and inflation data in coming days.

Another⁣ concern, Schneller said, was any ⁤deliberations on further oil production cuts, which could reignite inflationary ‌concerns ⁣and dampen ⁤investor confidence.

Brent crude futures surpassed $90 a barrel on Tuesday ⁤after Saudi Arabia and Russia both ‍said they would extend⁢ supply cuts to the end of 2023. Both Brent and U.S.⁣ West Texas Intermediate crude futures were about 30 and 40 cents down as of 1058 GMT at $89.65 and⁢ $86.42, respectively.

Adding to the dour mood, manufacturing activity in Germany, Britain and the euro zone declined, while their service‍ sectors fell ‌into contraction territory.

The ⁣results held “more ⁤evidence for⁤ increasingly weak growth in Europe ahead of the ECB’s decision ‍next week, and will only add to the ⁢fears of stagflation,” said Deutsche Bank strategist‌ Jim Reid ⁣in a note⁢ on Wednesday.⁢

As the U.S. returned from its ‍Labor Day holiday, traders‌ have been met with unusually high corporate bond⁤ issuance of over $36⁤ billion due to hit the market this week, ‌and $120⁤ billion of investment grade dollar-denominated issuance expected this month, the note also⁣ said.

“The pressure on ⁤US Treasury yields then⁤ comes as investors ⁣hedge the interest ⁤rate risk,” said Reid.

U.S. 10-year ‌Treasury yields fell ⁤by as much ‌as 2.6 basis‍ points to a low of 4.242% on Wednesday, having touched a session⁤ high ‌of 4.274%, its highest since Aug. 25, ‌while the U.S. dollar rose in⁢ earlier ⁢trading to a near six-month high against ⁤a basket of ‍currencies.

Investors ⁤are⁢ digesting recent signals on potential U.S. interest‍ rate rises. Fed Governor⁤ Christopher Waller said on Tuesday that⁣ the latest round of ‌economic data was giving‍ the U.S. central bank space to ⁢see if it needs to hike again.

The Institute ⁤for Supply⁣ Management (ISM) releases U.S. services PMI on Wednesday.

Spot gold was largely flat at $1,926.08 per ounce, after posting its⁢ biggest one-day loss since Aug. 1 on ⁤Tuesday.

(Reporting by Nell⁣ Mackenzie and Kane Wu; Editing by Edmund Klamann, Sam Holmes and Sharon Singleton)