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European and Asian stocks experienced declines on Friday, concluding a tumultuous week marked by geopolitical tensions between China and the US. Adding to the negative sentiment, softer economic data impacted valuations in Asia’s largest economy.
The Stoxx Europe 600, an index representing European equities, fell 0.5% with consumer goods stocks driving the declines. Additionally, France’s Cac 40 and Germany’s Dax declined by 0.6% and 0.4% respectively.
Furthermore, Asian markets also faced losses as investors absorbed the earlier week’s data indicating a significant decrease in China’s exports, the largest drop since the beginning of the Covid-19 pandemic. These developments raised concerns about China’s economic growth.
Hong Kong’s Hang Seng index dropped by 0.9%, resulting in a 1.5% decline for the week, while China’s CSI 300 fell by 2.3%, ending the week down by 1.1%.
In the US, futures contracts indicated a flat opening in New York as the previous night’s rally on Wall Street fizzled out. Investor optimism regarding softer inflation waned after a weaker-than-expected 30-year Treasury bond auction.
The contracts tracking the benchmark S&P 500 showed a 0.1% increase, while the tech-heavy Nasdaq 100 gained 0.2% before the opening bell in New York.
Inflation data from the US revealed a rise of 3.2% in prices on an annual basis for July, slightly below the expected 3.3%. This suggests that rising interest rates are starting to impact the world’s largest economy.
Simultaneously, the US Treasury conducted a $23bn long-dated bond sale at a high yield of 4.189%, slightly exceeding market levels. This issuance represents the highest coupon rate since June 2011.
The yield on the benchmark 10-year Treasury note increased by 0.02 percentage points to 4.1% on Friday, while the two-year yield remained at 4.83%. Bond prices decrease as yields rise.
London’s FTSE 100 experienced an 0.8% decline, while the pound strengthened after preliminary data revealed a 0.4% expansion in the UK’s economy during the second quarter. Analysts had anticipated a 0.2% increase.
Following the data release, the pound rose by 0.3% against the dollar, reaching a trading level of 1.2709.
The UK has trailed behind its European and US counterparts in combating rampant inflation, prompting concerns that the Bank of England may need to maintain higher interest rates for an extended period, placing strain on the economy.
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