European stock markets fell on Wednesday and government bond prices rose as traders weighed in on new signs of an impending economic slowdown.
The regional stock index of Stoxx Europe 600 fell by 0.6%, stopping three days of gains. The German DAX was down 1.2% and the FTSE 100 was up 0.1% in London.
These moves followed Heavy losses Overnight for major Wall Street stock indices in the U.S., after a weak consumer confidence report raised concerns about a decline.
Futures trading suggests that the S&P 500 stock index will rise 0.4% in New York early trades, while high-tech NASDAQ 100s also added 0.4%.
Central banks have moved to deal with sustained high inflation with aggressive interest rate hikes, which has raised concerns that tighter policies will curb business and household spending.
“We already have a lot of weak data from the US housing market, we have weak consumer confidence data from around the world because of rising prices, and business investments tend to respond to the consumer,” said Trevor Gritham, head of multi-asset assets at Royal London Asset Management.
In government bond markets, the yield on the 10-year US Treasury bill fell by 0.06 percentage points to 3.15% with the rise in the price of the bond. Germany’s 10 – year bond yield fell 0.07 percentage points to 1.57%.
Bond yields, which are upside down in price, tend to rise in line with interest rate and inflation forecasts. But market expectations of a possible recession have led to re-pricing in recent weeks.
After the Federal Reserve raised its principal fund interest rate by a particularly high rate of 0.75 percentage points this month, some of its policymakers Claimed a similar increase in July. The European Central Bank, which has experimented with negative interest rates to boost economic activity since 2014, is expected to raise its main deposit rate above zero by September.
Futures markets are now lowering the Fed’s index rate to 3.5% in early 2023, down from estimates two weeks ago to 3.9% – signaling lower expectations about how much central banks will raise lending costs.
The Fed’s current target range is 1.50-1.75 percent.
“People are worried about how much demand can go down in this time when central banks are raising interest rates quite aggressively,” said Nitesh Shah, head of commodities and macroeconomic research for Europe at WisdomTree.
“With a higher recession risk, bonds can help your portfolio because you can price some interest rate cuts in the coming years,” added Guilhem Savry, head of macro and dynamic allocation at Unigestion.
As a potential sign that rising inflation in some large economies is fading, Germany’s annual consumer price inflation fell to 7.6% this month from 7.9% in May, data showed on Wednesday.
Elsewhere in the market, Brent crude rose 1.3 percent to $ 119.54 a barrel, while fears of declining global demand were overshadowed. Supply deficit forecasts While Western countries are tightening restrictions on Russian exports.
In Asia, Hong Kong’s Hang Seng Index was down 1.9% while its technology stock sub-index was down 3.3%.
European stocks weaken on slowdown concerns Source link European stocks weaken on slowdown concerns