Stocks drop as investors worry about US rates, China woes
Shares fell Friday as investors contemplated the prospect that interest rates could remain higher for longer and on concerns over China's economy.
In the eurozone, Paris and Frankfurt ended the week in the red.
In London, the FTSE 100 also closed lower, as a wet July dampened UK retail sales, which fell more than expected last month, official data showed.
On Wall Street, the Dow Jones Industrial Average was flat after earlier falling shortly after trading began. The broad-based S&P 500 and the tech-rich Nasdaq Composite Index both retreated.
"Global stock markets took a Friday flop as investors grappled with the potential of sustained higher global interest rates," Stephen Innes, managing partner at SPI Asset Management, said.
"The trajectory of global stocks mirrored the downturn on Wall Street for much of the week as encouraging US economic data quashed hopes that the Federal Reserve would swiftly implement rate cuts."
Traders have been spooked after minutes from the US central bank's July meeting hinted that further increases in borrowing costs could lie ahead, as policymakers grapple with inflation.
While inflation in the United States has come down sharply in recent months, it remains at 3.2 percent. Some decision-makers at the Fed have suggested its two-percent goal can only be achieved and maintained by pushing interest rates higher.
That has led to a re-evaluation of the outlook for monetary policy. Optimism that last month's rate hike could be the last has given way to bets on one more before the end of the year.
On the bond markets, yields on the 10-year Treasury note eased off recent highs, but remained elevated.
"Yields continued to rise this week, topping 4.30 percent and near levels not seen since October 2007," analysts from Charles Schwab said.
"Rising yields can make bond returns more attractive relative to those from stocks, and also illustrate concerns the economy may still be running too strong for the Federal Reserve."
Fed chief Jerome Powell's speech at next week's annual Jackson Hole economic symposium in Wyoming will be closely followed for clues about the bank's plans.
- Anxious eye on China -
Asian markets were well in the red, too, including Hong Kong, which was down for a sixth consecutive trading day.
Investors are also keeping an eye on China, where authorities are struggling to get a grip on the economy as its recovery from Covid peters out.
And the property crisis is also back in the headlines.
On Thursday, Chinese property giant Evergrande Group filed for bankruptcy protection in the United States, a measure that protects its US assets while it attempts to push through a restructuring.
That comes days after Country Garden, another major Chinese developer, said there were "major uncertainties in the redemption of corporate bonds", suggesting it could default on a bond payment next month.
There are now concerns about property firms backed by the government, with Bloomberg reporting that many are warning of widespread losses.
It said 18 of the 38 state-owned enterprise builders traded in Hong Kong and China had posted preliminary losses in the first half of the year, compared with 11 that warned of full-year losses in 2022.
"China's property slowdown is already hurting all developers, including the large government-linked ones," said Zerlina Zeng of CreditSights Singapore.
"We do not expect the situation to materially improve in the second half."
- Key figures around 1545 GMT -
London - FTSE 100: DOWN 0.65 percent at 7,262.43 (close)
Frankfurt - DAX: DOWN 0.65 percent at 15,574.26 (close)
Paris - CAC 40: DOWN 0.4 percent at 7,164.11 (close)
EURO STOXX 50: DOWN 0.4 percent at 4,212.95
New York - Dow: FLAT at 34,472.93
Tokyo - Nikkei 225: DOWN 0.6 percent at 31,450.76 (close)
Hong Kong - Hang Seng Index: DOWN 2.10 percent at 17,950.85 (close)
Shanghai - Composite: DOWN 1.0 percent at 3,131.95 (close)
Euro/dollar: DOWN at $1.0870 from $1.0878 on Thursday
Pound/dollar: DOWN at $1.2735 from $1.2745
Euro/pound: UP at 85.37 pence from 85.29 pence
Dollar/yen: DOWN at 145.20 from 145.79 yen
West Texas Intermediate: UP 0.5 percent at $80.23 per barrel
Brent North Sea crude: UP 0.3 percent at $84.37 per barrel
D.Nielsen--RTC
