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European shares slid on Friday, led by basic material and industrial stocks, as investors worried that an economic slowdown in China could weigh on global demand.
Europe’s region-wide Stoxx Europe 600 gave up early gains, based on gains for defensive stocks, to trade 0.5 per cent lower and on track to record its eighth straight day of losses. France’s Cac 40 and Germany’s Dax lost 0.6 per cent and 0.7 per cent respectively.
The Stoxx Europe Industrial Goods and Services index lost 1.2 per cent, leading a broad-based decline. Three-quarters of the benchmark Stoxx 600 index fell.
The moves come amid a week of bleak economic data releases from China, which signalled a continued decline in its exports and imports as well as a weakening service sector.
In the US, futures contracts tracking the benchmark S&P 500 and those tracking the tech-focused Nasdaq 100 fell 0.3 per cent ahead of the New York open.
Asian equities declined following an overnight sell-off on Wall Street, with falls in tech stocks dragging the benchmark CSI 300 0.5 per cent lower. Japan’s Topix fell 1 per cent while Hong Kong markets were shut due to bad weather.
Apple supplier TSMC, the world’s biggest contract chipmaker, saw its shares drop 0.6 per cent a day after the tech sector sold off sharply in the US and China, following reports that Beijing had banned central government officials from using iPhones for work.
At the same time, a string of data releases in Europe pointed to weakness in the region’s service and construction sectors, more than a year after the European Central Bank started to raise interest rates.
The majority of investors believe that the data-dependent central bank will hold back from further tightening at its upcoming policy meeting next week, but some bet there are still more rate rises to come before the end of this year.
“We do not think the ECB will want to ‘shock’ the market, particularly against a backdrop of weakening economic data,” said Paul Hollingsworth, chief European economist at BNP Paribas.
Yields on the policy-sensitive two-year German Bund slipped 0.02 percentage points to 3.08 per cent, while those on the 10-year Bund, a regional benchmark in Europe, fell 0.01 percentage points to 2.61 per cent. Bond yields fall as prices rise.
Meanwhile, oil prices steadied after rising sharply earlier this week, when Saudi Arabia and Russia announced they would extend supply cuts until the end of year, boosting investors’ concerns over rising price pressures.
Brent crude traded down 0.2 per cent at $89.75 a barrel. US equivalent West Texas Intermediate fell 0.4 per cent to $86.55 a barrel.
Analysts do not “expect oil prices to drift too much upwards in the context of an overall slowdown in economic growth . . . and with the Chinese economy struggling to meet its growth targets”, according to Nadège Dufossé, global head of multi-asset at Candriam.
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