Growth jitters trip stumbling stocks and bonds

LONDON/HONG KONG  -Global stocks fell on Wednesday after faltering growth in China and Europe heightened concerns about broader economic momentum, while the dollar firmed as investors weighed up the outlook for Federal Reserve interest rates.

MSCI’s broadest gauge of world stocks had slipped 0.1 percent by 0845 GMT.

European stocks declined, extending losses for a sixth consecutive session, dragged lower by global economic slowdown fears and higher crude prices.

The pan-European STOXX 600 index was at a week’s low of 0.8 percent by 0845 GMT.

German industrial orders fell more than expected in July, the federal statistics office said. Euro zone construction PMIs and retail sales data are due later in the day.

In Asia, the Hang Seng Index closed down 150 points and China’s benchmark CSI300 Index fell 0.22%, ahead of expectations that China’s exports contracted at a slower pace in August.

READ: Asia stocks fall as global growth concerns mount

Chinese investor sentiment also wavered after a private-sector survey on Tuesday showed services activity expanded at the slowest pace in eight months in August, reflecting weak demand.

READ: China’s August services activity slows amid sluggish demand – Caixin PMI

“Key risks that could undermine equity sentiment in September include developments in China’s property market and potential increases in food and energy prices,” said Bruno Schneller, a managing director at Invico Asset Management.

China is also set to release lending and inflation data in coming days.

Another concern, Schneller said, was any deliberations on further oil production cuts, which could reignite inflationary concerns and dampen investor confidence.

Brent crude futures surpassed $90 a barrel on Tuesday after Saudi Arabia and Russia both said they would extend supply cuts to the end of 2023. Both Brent and U.S. West Texas Intermediate crude futures were over 60 cents down as of 0845 GMT at $89.37 and $86.05, respectively.

Adding to the dour mood, manufacturing activity in Germany, Britain and the euro zone declined, while their service sectors fell into contraction territory.

READ: Euro zone August downturn deeper than was thought -PMIs

“The Europe data were rather weak. We think there is still a high chance to have a mild recession in the U.S. and Europe toward the end of the year or beginning of next year,” said Redmond Wong, Greater China market strategist at Saxo Markets.

As the U.S. returned from its Labor Day holiday, traders have been met with unusually high corporate bond issuance of over $36 billion due to hit the market this week, and $120 billion of investment grade dollar-denominated issuance expected this month, noted Deutsche Bank strategist Jim Reid on Wednesday.

“The pressure on US Treasury yields then comes as investors hedge the interest rate risk,” said Reid in a note.

US 10-year Treasury yields fell by as much as 2.6 basis points to a low of 4.242 percent on Wednesday, having touched a session high of 4.274 percent, its highest since Aug 25, while the U.S. dollar rose in earlier trading to a near six-month high against a basket of currencies.

Investors are digesting recent signals on potential U.S. interest rate rises. Fed Governor Christopher Waller said on Tuesday that the latest round of economic data was giving the U.S. central bank space to see if it needs to hike again.

The Institute for Supply Management (ISM) releases U.S. services PMI on Wednesday.

Spot gold dipped 0.1 percent to $1,923.01 per ounce by 0835 GMT, after posting its biggest one-day loss since Aug. 1 on Tuesday.