European shares fall as weak China data adds to growth concerns

European stocks and US equity futures opened the week lower after unexpectedly weak Chinese economic data increased fears of a global slowdown.

The regional Stoxx 600 share index fell 0.8 per cent in early dealings, while London’s FTSE 100 lost 0.7 per cent.

Futures contracts that wager on the direction of Wall Street’s S&P 500 fell 0.9 per cent and those on the technology-heavy Nasdaq 100 dropped 1.2 per cent.

Monday’s moves signalled global equities may continue their longest weekly losing streak since the 2008 financial crisis, as soaring inflation drives central banks to raise interest rates at a time when investors are worried economic activity is not strong enough to withstand tight monetary policy.

“Markets are falling not just because of higher interest rates,” said Luca Paolini, chief strategist at Pictet Asset Management.

“The risk of a recession [in major economies] is significant,” he added. “The reality is a big chunk of the global economy is basically contracting.”

Data on Monday showed Chinese retail sales dropped 11.1 per cent in April from the same month last year, in a worse result than economists had expected, as a wave of stringent coronavirus lockdowns across the country reduced demand. Industrial production, which analysts had expected to rise slightly, fell 2.9 per cent.

Meanwhile, Brussels was set to cut its growth forecasts for the euro area further and lift its inflation outlook to reflect the predicted effects of an energy crisis triggered by Russia’s invasion of Ukraine on the EU economy.

Lloyd Blankfein, senior chair of Goldman Sachs, told CBS News on Sunday there was a “very, very high risk” of a US recession. The world’s largest economy contracted unexpectedly in the first quarter of the year, while consumer price inflation was running close to a four-decade high.

The US Federal Reserve earlier this month raised its main borrowing cost by 0.5 percentage points, while chair Jay Powell said moves of the same size “should be on the table at the next couple of meetings”.

European Central Bank president Christine Lagarde also signalled last week that the institution was ready to drop its long-held policy of keeping interest rates in the currency bloc below zero.

Adding to concerns about sustained global inflation, wheat prices rose by the maximum limit on Monday after India banned exports in response to supply disruptions caused by the Ukraine war.

In Asia, mainland China’s CSI 300 share index fell 0.8 per cent, while Hong Kong’s Hang Seng added 0.2 per cent and Tokyo’s Topix traded flat.

Brent crude oil dipped 1.2 per cent lower to $110.2 a barrel.

The yield on the 10-year US Treasury note, which moves inversely to the price of the benchmark debt security, fell 0.04 percentage points to 2.9 per cent as traders retreated from equities to buy up the low-risk asset.