Stocks stumble as Chinese data stoke global economy fears

  • Euro STOXX 600 down 0.2%
  • China’s growth in 2022 is one of the worst in nearly 50 years
  • Asian stocks slip 0.4%
  • Yen close to 7-month highs

LONDON, Jan 17 (Reuters) – Shares tumbled on Tuesday after China’s 2022 growth slump, halting their New Year’s rally and keeping investors on edge for the risk of a global recession, while the yen Japan held near a seven-month high ahead of a key central bank decision.

The Euro STOXX 600 (.STOXX) lost 0.2%, slipping from its nine-month high hit on Monday. Global equities had risen so far in 2022, boosted by hopes of a rebound in China’s economy and easing 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 underscoring the toll imposed by Beijing’s strict “zero-COVID” policy.

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

Rate-sensitive tech stocks (.SX8P) fell 0.8%, weighing on the STOXX 600 as a whole. Wall Street, meanwhile, was expected to open slightly lower after a holiday on Monday, with E-mini futures for the S&P 500 down 0.3%.

Market participants said investors were taking stock of how economies would develop as inflation peaked and central bank monetary policy tightening slowed, with Chinese data underscoring doubts over whether it could act as a spur.

“What will be the thing that invigorates growth? says Gaël Combes, head of fundamental research at Unigestion. “China is unlikely to provide the lift it has provided in the past, such as during the global financial crisis.”

Earlier, shares in Asia-Pacific ex-Japan (.MIAPJ0000PUS) deepened losses in response to Chinese data, closing down 0.4%. Hong Kong shares (.HIS) fell 0.8% and China’s benchmark CSI300 index (.CSI300) recouped losses to close flat.

BOJ UNDER PRESSURE

Around the world, the R-word continues to hold a prominent place.

Two-thirds of chief private and public sector economists polled by the World Economic Forum in Davos expected a global recession this year, with some 18% rating it as “extremely likely”, more than double the previous survey conducted in September 2022. .

Traders remained focused on central banks.

The Japanese yen remained near seven-month highs as investors held their breath for a possible policy change at the Bank of Japan (BOJ).

The yen stabilized around 128.78 after hitting a high of 127.22 to the dollar on Monday, as traders braced for sharp moves when the BOJ wraps up 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 itself some leeway backfired, encouraging bond investors to test its resolve.

The dollar index rebounded from a seven-month low of 101.77 hit a day ago, holding at 102.27, while the pound rose slightly after the pace of wage growth in Great Britain Britain, watched closely by the Bank of England as it assesses how much to raise interest rates, accelerated again.

The pound rose 0.5% to $1.2254 after wage growth accelerated in the three months to November, while employment rose faster than expected.

Government bond markets were relatively calm, with eurozone bond yields up slightly from last week’s lows, but global bond trading was cautious ahead of the month. outcome of the BOJ meeting.

As equities have rallied this year, other riskier assets have also risen.

The No. 1 cryptocurrency bitcoin posted a gain of around a quarter in January, jumping more than 20% in the past week alone, putting it on track for its best month since October 2021. It last traded at $21,208.

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

Our standards: The Thomson Reuters Trust Principles.

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