LONDON: Stock markets mostly retreated Wednesday as data showed ongoing weakness in China’s economy, offsetting hope that the Federal Reserve would skip an interest rate hike this month.
The OECD grouping of leading industrialised nations slightly raised its growth outlook for the world economy as inflation eases and after China dropped Covid restrictions, but it warned the recovery faced a “long road”.
A World Bank warning on the global economic outlook Tuesday gave some food for thought as it lowered its growth expectations for next year.
European stocks recede at open
Reports that US Secretary of State Antony Blinken would visit China provided optimism for a thawing of relations between the superpowers.
In foreign exchange, the Turkish lira sank to a all-time low against the dollar, with the currency continuing to struggle after the re-election of President Recep Tayyip Erdogan at the end of May.
The greenback, which hit a peak at 23.17 lira, was down against the euro, pound and yen.
Traders are keeping tabs on China, with reports saying authorities have asked the country’s biggest banks to lower their deposit rates to boost the economy as it struggles to recover from years of zero-Covid lockdowns.
Analysts said such a move could indicate the People’s Bank of China was considering an interest rate cut as soon as this month.
The need for fresh help was highlighted Wednesday by data showing Chinese exports tumbled more than seven percent in May, far more than expected and the first drop since February.
The reading follows figures showing shrinking factory activity and showed the uphill task officials have in kickstarting the economy.
While imports performed better than forecasts, there remain concerns over consumer activity.
Oil prices gained in more volatile trading for the commodity as traders weigh Saudi output cuts against potential slowing demand as the global economy continues to battle elevated inflation.
Along with weak Chinese data, markets reacted also to news of subdued industrial production in Europe’s biggest economy, Germany.
The Chinese reading was “yet another disappointing data which will raise growth concerns and intensify expectations of more policy support”, said Khoon Goh, at Australia and New Zealand Banking Group.
Figures also showed China’s total trade with Russia hit $20.5 billion in May, its highest level in a single month since Moscow’s invasion of Ukraine.
Next week’s Fed policy decision was also in focus, with investors hoping officials will decide not to lift borrowing costs for an 11th meeting in a row, in light of data indicating more than a year of tightening is beginning to kick in.
A mixed jobs report last week, which showed a pick up in hiring but slower wage growth, suggested the US economy remained healthy and gave the central bank room to skip a hike this month, even as inflation remains sticky.
Key figures around 1045 GMT
London - FTSE 100: UP 0.1 percent at 7,638.05 points
Frankfurt - DAX: DOWN 0.1 percent at 15,971.69
Paris - CAC 40: DOWN 0.1 percent at 7,198.67
EURO STOXX 50: DOWN 0.2 percent at 4,287.71
Tokyo - Nikkei 225: DOWN 1.8 percent at 31,913.74 (close)
Hong Kong - Hang Seng Index: UP 0.8 percent at 19,252.00 (close)
Shanghai - Composite: UP 0.1 percent at 3,197.76 (close)
New York - Dow: FLAT at 33,573.28 (close)
Euro/dollar: UP at $1.0712 from $1.0696 on Tuesday
Pound/dollar: UP at $1.2457 from $1.2427
Dollar/yen: DOWN at 139.34 yen from 139.65 yen
Euro/pound: DOWN at 85.97 pence from 86.07 pence
Brent North Sea crude: UP 0.9 percent at $77.01 per barrel
West Texas Intermediate: UP 1.0 percent at $72.46 per barrel
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