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Global stocks fell on Wednesday after weaker-than-expected data from China dampened sentiment as investors awaited the minutes of the Federal Reserve’s June monetary policy meeting.
Wall Street’s benchmark S&P fell 0.2 percent and the tech-heavy Nasdaq Composite was flat as US markets reopened after the Independence Day holiday.
The declines came as investors turned their attention to the release of minutes from the Fed’s last meeting later on Wednesday, hoping to gauge policymakers’ views on future interest rates.
The US Federal Reserve decided in June to keep interest rates stable within a target range of 5 to 5.25 percent, but signaled that its tightening campaign will not end until inflation returns to its 2 percent target.
“We do not expect any negative reaction from the markets as the markets are well prepared for this [hawkish] Tone from the Fed on the record,” said Mobeen Tahir, director of macroeconomic research and tactical solutions at WisdomTree Europe.
“Markets are realizing that central banks are tightening more than necessary.” . . The perception is that the Fed is rather overextended on inflation and a looser change of course is only a matter of time,” he noted.
Traders will also be keeping a close eye on US jobs data released on Friday, hoping to gauge the impact of high borrowing costs on the economy 16 months since the Fed began raising interest rates.
Meanwhile, the pan-European Stoxx 600 shed 0.7 percent, weighed down by declines in materials and technology stocks, France’s Cac 40 slipped 0.8 percent and the FTSE 100 slipped 0.8 percent.
Indices slipped after China’s services sector data fell short of expectations, raising concerns the world’s second-largest economy was struggling to recover after years of tight pandemic restrictions.
The closely-watched Caixin Services PMI came in at 53.9 on Wednesday, down from 57.1 in May and below consensus estimates of 56.2. Values above 50 indicate an expansion in activity.
“The service sector recovery appears to be slowing after the initial strong growth spurt that took place immediately after China’s scrapping of the zero-Covid policy,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
“This requires a measured easing approach but not a mega stimulus. Limited fiscal, quasi-fiscal and targeted monetary policy action is likely to follow,” he noted.
The People’s Bank of China cut interest rates last month for the first time in almost a year, as policymakers provided cautious monetary support to boost more robust growth.
China’s CSI 300 fell 0.8 percent after the data was released and Hong Kong’s Hang Seng index slipped 1.6 percent. Japan’s Topix was flat.
Additionally, geopolitical tensions between the US and China added to investors’ concerns about the technology sector, as Beijing introduced new export controls on gallium and germanium products used in semiconductors earlier in the week.
Oil prices continued to climb from the previous session, buoyed by the announcement that two of the world’s largest oil producers, Saudi Arabia and Russia, plan to cut supply in August.
Brent crude, the international benchmark, rose 0.8 percent to $76.82 a barrel. West Texas Intermediate, which is based on US oil prices, rose 3.24 percent to $72.04.