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European and Asian stocks fell on Friday as traders closed out a week marred by geopolitical tensions between China and the US, and softer economic data that dented valuations in Asia’s largest economy.
The region-wide Stoxx Europe 600 fell 0.5 per cent, with consumer goods stocks leading declines, while France’s Cac 40 lost 0.6 per cent and Germany’s Dax declined 0.4 per cent.
Asian markets were also lower as investors continued to digest data earlier in the week that showed China’s exports fell by the most since the beginning of the Covid-19 pandemic, amplifying concerns about the country’s economic growth.
Hong Kong’s Hang Seng index shed 0.9 per cent, ending the week 1.5 per cent lower, while China’s CSI 300 fell 2.3 per cent, leaving it down 1.1 per cent in the week.
Futures contracts tracking US markets indicated a flat opening in New York as an overnight rally on Wall Street fizzled out. Investor optimism over softer inflation gave way to caution after a weaker-than-expected 30-year Treasury bond auction.
Contracts tracking the benchmark S&P 500 rose 0.1 per cent, while those for the tech-heavy Nasdaq 100 gained 0.2 per cent ahead of the New York open.
The latest US inflation reading on Thursday showed prices rose at an annual rate of 3.2 per cent in July, marginally below the 3.3 per cent expected, in a sign that rising interest rates were beginning to feed through to the world’s largest economy.
At the same time, the US Treasury sold $23bn in long-dated bonds at a high yield of 4.189 per cent, slightly above market levels ahead of the bid deadline. The coupon on the new debt was the highest since June 2011.
The yield on the benchmark 10-year Treasury note rose 0.02 percentage points to 4.1 per cent on Friday, while the two-year yield was flat at 4.83 per cent. Bond yields rise as their prices fall.
London’s FTSE 100 was down 0.8 per cent, and the pound rose after preliminary data showed the UK’s economy expanded 0.4 per cent in the second quarter, overshooting analysts’ expectations of a 0.2 per cent increase.
The pound gained 0.3 per cent against the dollar to trade at 1.2709 following the data release.
The country has lagged behind its peers in Europe and the US in its efforts to cool raging inflation, raising concerns that the Bank of England would need to keep interest rates higher for longer, putting a strain on the economy.
