Wall Street stocks weaker after economic data fall short of estimates

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Equities updates

Global stock markets pulled back from recent highs on Monday as soft data in the world’s two largest economies spurred investors to shun riskier assets.

Wall Street’s blue-chip S&P 500 index was down 0.2 per cent by lunchtime in New York, retreating from the record levels hit last week after the Empire State index, which tracks business activity in New York state, sank to 18.3 from 43 in July and fell short of the consensus estimate of 28.5, according to Pantheon Macroeconomics.

Meanwhile, the tech-heavy Nasdaq Composite and the small-cap Russell 2000 indices were down 0.7 per cent and 0.5 per cent, respectively.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said it was “tempting to blame [the index’s] softening on the surge of Covid cases caused by the Delta variant, but that’s probably not the story”.

However, “the Empire State index is now merely back in line with the level implied by China’s Caixin PMI [purchasing managers’ index] a couple months ago”, he said.

Economic data from China also disappointed on Monday. The country’s National Bureau of Statistics said industrial production rose 6.4 per cent year on year in July, lower than market expectations of 7.8 per cent. Retail sales were also far weaker than expected.

These figures revealed “that the world’s second-biggest economy is cooling off rapidly”, said Jeroen Blokland, head of research at True Insights, and “could also be a harbinger of the economic trend in other regions, especially because supply-chain disruptions remain abundant”.

Column chart of Stoxx Europe 600 index, daily % change  showing Winning streak for European stocks comes to an end

The CSI 300 index of large Shanghai- and Shenzhen-listed stocks fell 0.1 per cent while Hong Kong’s Hang Seng ended the day 0.8 per cent lower.

The hit to investor sentiment ended a 10-session winning streak for the region-wide Stoxx Europe 600 benchmark, which fell 0.5 per cent, its first fall this month.

“The bears have come back into the European markets, owing to concerns over the Chinese slowdown as well as geopolitical risk emanating from the Taliban in Afghanistan,” said Aneeka Gupta, director of research at WisdomTree.

All big European bourses fell, with London’s FTSE 100 down 0.9 per cent, Frankfurt’s Xetra Dax off 0.3 per cent and the CAC 40 in Paris 0.8 per cent weaker.

The cautious mood meant haven assets were in demand, taking the yield on the 10-year US Treasury down 0.05 percentage points to 1.25 per cent.

Brent crude, the global oil benchmark, sank more than 1 per cent to below $70 a barrel.

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