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European Stocks Fall As China Retreats, Fed Speaks Bad Mood: Markets Wrap

European Stocks Fall As China Retreats, Fed Speaks Bad Mood: Markets Wrap

(Bloomberg) — European stocks fell, tracking markets lower in Asia, as concern about local government debt in China and hawkish language from a US central bank put traders on a risk-averse note.

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The Stoxx 600 fell 0.7%, snapping two days of gains and trimming its fourth weekly advance in five. US stock futures fluctuated and Treasury yields fell. The British pound led the gains among G10 currencies against the dollar after its strongest quarterly growth in more than a year.

Markets were shaky after San Francisco Reserve Bank President Marie Daley said the Fed still had “more work to do” to combat rising prices, dampening the impact of broadly positive inflation data on Thursday. In China, the government has moved to manage local government debt, a major threat to the country’s financial stability, while real estate developer Country Garden Holdings predicted a loss of billions of dollars in the first half of this year.

“The issues we’ve seen with the Chinese property market are a little global reminder of the uncertainty about what can happen to extended balance sheets,” said Richard Flakes, chief investment officer at European digital wealth manager Moneyfarm. “There may be other incidents waiting to happen as a result of price hikes that we haven’t seen yet.”

This week saw a significant move in safe-haven assets and an exit in stocks, according to strategists at Bank of America Corp. Cash funds attracted $20.5 billion in inflows, while investors pumped $6.9 billion into bonds in the week through Aug. 9, according to Bank of America, citing data from EPFR Global. Meanwhile, US stocks posted their first outflow in three weeks at $1.6 billion.

Bank of America says investors are flocking to cash; Treasury bonds follow standard flows

In currencies, the Bloomberg Spot Dollar Index held steady after rising on Thursday. The dollar is set for its fourth week of gains, the longest such streak since February. Meanwhile, the continued decline in the value of the Australian dollar is starting to add to inflation fears.

“Our view that the US dollar’s upside is likely to be limited remains,” said Christopher Wong, currency analyst at Oversea Chinese Banking Corp. An inflection point can occur when the market narrative shifts to trading further interest rate cuts. And it could take several months, depending on how the data fizzles out.”

Australian, South Korean and Chinese stock indices fell, with the Hang Seng technology index falling 2.7%. All but one of the 30 index members declined, with Alibaba Group Holding Ltd. the only gainer after it beat revenue estimates in its latest quarterly results. Country Garden’s declines put a benchmark of Chinese real estate developers on track for its worst week since October.

Biden calls the Chinese economy a “time bomb” in a new game

In the commodities sector, oil was on track to end the week with little change ahead of a report from the International Energy Agency.

Main events this week:

  • UK Industrial Production, Gross Domestic Product, Fri

  • US University of Michigan Consumer Confidence, Producer Price Index, Friday

Some of the major movements in the markets:


  • The Stoxx Europe 600 is down 0.7% as of 10:04 a.m. London time.

  • S&P 500 futures changed little

  • The Nasdaq 100 fell 0.2%.

  • Futures contracts on the Dow Jones Industrial Average changed little

  • The MSCI Asia Pacific Index fell 0.7%.

  • The MSCI Emerging Markets Index fell 0.9%.


  • The Bloomberg Spot Dollar Index has not changed

  • The euro rose 0.2 percent to $1.0998

  • The Japanese yen was little changed at 144.62 against the dollar

  • The external yuan was little changed at 7.2487 per dollar

  • The British pound rose 0.2 percent to $1.2705

Digital currencies

  • Bitcoin fell 0.2% to $29,374.7

  • Ether fell 0.2% to $1,845.67


  • The yield on the 10-year Treasury fell 2 basis points, to 4.08%.

  • Germany’s 10-year yield advanced three basis points to 2.56%.

  • The UK 10-year yield advanced nine basis points to 4.45%.


  • Brent Crude hasn’t changed much

  • Spot gold rose 0.4 percent to $1919.25 an ounce

This story was produced with help from Bloomberg Automation.

– With assistance from Brett Miller and Wenjin Lv.

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