European stocks slip on China growth fears

European stocks were under further pressure in morning trade on Friday after a new tough data privacy law in China hit domestic tech stocks and investors fretted over the impact of coronavirus Delta variant on the global economy.

The benchmark Stoxx 600 fell 0.3 per cent in morning trade as investors turned away from consumer goods stocks such as Burberry, LVMH and Moncler, which were among those hardest hit. Miners such as Anglo American, Glencore and Rio Tinto also dropped at least 2 per cent.

The FTSE 100 was down 0.2 per cent in early trading, while the Cac 40 in Paris dropped 0.1 per cent and Frankfurt’s Dax 30 was down 0.3 per cent.

Equities markets around the world have been under pressure all week on concerns that Covid-19 may dent a global economic recovery and the US would taper its domestic economic stimulus package.

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Focus

The US dollar index, which measures the greenback against other major currencies, is on track to reach its highest point since early November as traders sought out haven assets.

“The markets have moved on from a focus on Fed policy and tapering to a focus on Chinese economic slowdown and the impact on Chinese policies,” said Kit Juckes, a macro strategist at Société Générale.

Asian stocks, which began the week with a sell-off on the back of weak data out of China, looked set to end the week under further pressure. The MSCI index for Asia Pacific markets was down 1.9 per cent.

The impact of China’s new data privacy law, due to come into effect on November 1, weighed heavily on sentiment across the region. The Hang Seng Tech index of China’s largest internet and ecommerce stocks, including Meituan, Tencent and Alibaba, fell 2.5 per cent.

Tencent’s value has dropped by a little over 12 per cent this month, while Alibaba is down in 14.1 per cent in the month to date.

UK retail sales fell 2.5 per cent in July, following the adding to data out of China and the US suggesting that Delta variant concerns and lockdowns are hitting shoppers’ demand.

Yields

Indices tracking US futures were also down after Wall Street wobbled amid concerns on tightening US monetary policy. The Federal Reserve’s $120 billion (€102.6 billion) a month in asset purchases has been key to supporting a global equities rally. The e-mini S&P 500 was down 0.6 per cent, while the tech-focused e-mini Nasdaq 100 was down 0.5 per cent.

The bond market saw lower yields, which move inversely to price across the board. US 10-year Treasuries fell 0.007 percentage points to a yield of 1.235 per cent, while in Europe, German 10-ear Bunds were down 0.002 percentage points at a yield of -0.49 per cent.

Oil rose slightly in morning trading, with global benchmark Brent crude up 0.4 per cent at $66.67 a barrel. Nevertheless, it remains about $10 below the heights it hit last month, as the Covid variant affects demand.

Investors continued to move into safe haven assets such as gold, which was the only major commodity which rose on Friday morning. The US dollar continued to strengthen against the pound, sliding 0.1 per cent against it to $1.36. However, it was slightly weaker against the euro, which rose 0.1 per cent to $1.1682 in the European morning.

Copyright The Financial Times Limited 2021