Stocks fall as Chinese data fuels economic slowdown fears

  • Euro STOXX 600 0.2% lower
  • China reports weak Q4 data
  • Asian equities fall 0.4%
  • Yen close to 7-month high

LONDON/HONG KONG, Jan. 17 (Reuters) – European stocks paused their New Year’s rally and Asian stocks slumped after China reported weak fourth-quarter economic data on Tuesday, leaving investors on edge over the prospects of a global recession.

The Euro STOXX 600 (.STOXX) lost 0.2%, falling from its highest hit in nine months on Monday. Global equities have rallied so far in 2022, spurred by hopes of a recovery in China’s economy and an easing of price pressures in the United States and Europe.

But Chinese data showed the world’s second-largest economy grew 2.9% in the fourth quarter of last year, beating expectations but underlining the toll taken by the strict “zero COVID” policy. Beijing policy.

China’s 2022 growth of 3% was well below the official target of around 5.5%. Excluding 2.2% growth after COVID-19 first hit in 2020, this was the worst performance in nearly half a century.

Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) added to their losses in response and were the last to fall 0.4%. Equities in Hong Kong (.HSI) fell 0.8% and the Chinese benchmark CSI300 Index (.CSI300) reversed losses to finish flat.

In Europe, China-exposed financial institutions HSBC (HSBA.L) and Prudential (PRU.L) fell 1% and 0.4% respectively. Economy-sensitive consumer staples such as Unilever and Danone (DANO.PA) also fell more than 1% each.

Market players said investors were taking stock of how economies would grow as inflation spikes and the central bank’s monetary policy tightening slows, with the Chinese data underscoring doubts whether this could act as a stimulus.

“What will drive growth?” said GaĆ«l Combes, head of basic research at Unigestion. “China is probably unlikely to provide the lift it has provided in the past, such as during the global financial crisis.”

Wall Street was expected to open slightly lower after a holiday Monday, with E-mini futures for the S&P 500 falling 0.3%.

BOJ UNDER PRESSURE

The dollar index rebounded from a seven-month low of 101.77 a day ago to hold at 102.30, while the Japanese yen remained close to its seven-month high as investors held their breath over a possible policy change at the Bank or Japan (BOJ). .

The yen stabilized around 128.51 on Tuesday after reaching a high of 127.22 per dollar on Monday, with traders bracing for sharp moves as the Bank of Japan (BOJ) concludes a two-day meeting on Wednesday.

The BOJ is under pressure to change its interest rate policy as early as Wednesday after its attempt to buy breathing space for itself failed, encouraging bond investors to test its resolve.

Eurozone bond yields rose cautiously from the low of the month at the end of last week, but global bond trading was cautious awaiting the outcome of the BOJ meeting.

All over the world, the R word continues to loom large.

Two-thirds of chief private and public sector economists polled by the World Economic Forum in Davos expected a global recession this year, with about 18% considering it “extremely likely” – more than twice the number in the previous survey which was held in September 2022.

While stocks rose this year, other riskier assets also gained. The No. 1 cryptocurrency bitcoin has gained about a quarter in January, rising more than 20% in the past week alone, heading into its best month since October 2021. It last traded flat at $21,208.

Spot gold fell 0.5% to $1909.23 an ounce.

Reporting by Tom Wilson in London and Kane Wu in Hong Kong; Edited by Gerry Doyle, Neil Fullick and Alex Richardson

Our Standards: The Thomson Reuters Principles of Trust.

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