European stock markets extend their losses due to slowdown warnings

European stocks fell on Friday and the German 10-year bond yield hit its highest level since mid-June as investors braced for a rise in U.S. interest rates. , while warnings from the World Bank and the International Monetary Fund fueled fears of a slowdown.

  • The World Bank’s chief economist said on Thursday he was concerned about a period of low growth and high inflation in the world economy. The International Monetary Fund said downside risks continue to dominate the global economic outlook, but it is too early to say whether there will be a widespread global recession.
  • Wall Street fell on Thursday, after US economic data gave the Federal Reserve little reason to ease its aggressive policy of rate hikes.
  • The bearish tone continued during Asian trading as data showed China’s real estate sector contracted further last month.
  • At 0815 GMT, the MSCI index of world shares, which tracks markets in 47 countries, was down 0.5% and headed for its fourth straight day of losses.
  • Europe’s STOXX 600 was down 1.2% and London’s FTSE 100 was down 0.1%. The German DAX lost 1.8%.
  • Markets see a 75% chance of a 75 basis point rate hike and a 25% chance of a 100 basis point hike when the Federal Reserve meets next Wednesday.
  • In the UK, retail sales fell more than expected, in another sign the economy is slipping into recession as the cost-of-living crisis squeezes households’ disposable spending.
  • “Now we see that the data confirms that the economy is slowing down,” said Axel Rudolph, market analyst at IG Group (LON: IGG ). “I expect equities to fall back below their March lows. If we find ourselves in an environment where central banks aggressively hike rates, historically this has always led to bear markets.”
  • Sterling weakened to a 37-year low against the US dollar.
  • The dollar index rose 0.3% to 110.13, still near a 20-year high, and was flat against the yen at 143.365 per dollar.
  • According to market analysts and fund managers, the yen could fall to a three-decade low before the end of the year.
  • The dollar’s strength pushed the Chinese yuan above the 7 per dollar level for the first time in almost two years.
  • The euro was slightly lower and traded at $0.9961. Two-year German bond yields hit a new 11-year high after the European Central Bank deputy chairman said an economic slowdown in the euro zone would not be enough to control inflation and the bank will have to keep raising rates. interest rates.
  • The benchmark 10-year German bond yield rose 3 basis points on the day to 1.765%, after hitting its highest since mid-June in early trading.
  • Oil prices rose but were headed for a weekly drop on fears of reduced demand.
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