Stocks, oil slide as dire China data fuels recession fears

Traders appear in front of a screen with transaction data in red at the Stock Exchange of Thailand building in Bangkok, Thailand, March 13, 2020. REUTERS/Juarawee Kittisilpa/Files

SYDNEY, May 16 (Reuters) – Asian shares tumbled on Monday and oil prices fell after shockingly weak data from China highlighted the severe damage to the world’s second-largest economy from lockdown measures.

China’s retail sales fell 11.1% in April from a year earlier, nearly double the fall forecast, while industrial output fell 2.9%, while analysts had expected a small increase.read more

“These data paint a picture of a stagnant economy that requires more aggressive stimulus and a rapid easing of COVID restrictions, neither of which is necessary,” said Mitul Kotecha, head of emerging markets strategy at TD Securities. Very likely soon.” .

“China’s weaker growth trajectory will add to its market pressure and contribute to a further deterioration in the global economic outlook, weighing on risk assets. We expect the yuan to depreciate further.”

In Europe, EUROSTOXX 50 and FTSE futures were both down 0.3%. S&P 500 futures fell 0.6% and Nasdaq futures fell 0.5%. Both are far from last year’s highs, and the S&P has fallen for six straight weeks.

The People’s Bank of China also disappointed those hoping to ease interest rates, although Beijing did allow further reductions in mortgage rates for some homebuyers on Sunday.read more

Monday’s data overshadowed news that Shanghai plans to fully reopen and return to normal life from June 1.read more

Chinese blue chips (.CSI300) It fell 0.8%, while commodity currencies took a hit led by the Australian dollar, which is often used as a liquidity proxy for the Chinese yuan.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) The stock pared early gains and was flat after falling 2.7% last week and hitting a two-year low.

Japan’s Nikkei (.N225) While the weaker yen provided some support for exporters, it was down 2.1% last week, but held on to a 0.5% gain.

High inflation and rising interest rates pushed U.S. consumer confidence to an 11-year low in early May and raised risks to April retail sales due on Tuesday.read more

downgrade growth

The ultra-hawkish Federal Reserve pushed financial conditions to tighten sharply, leading Goldman Sachs to downgrade its 2022 GDP growth forecast to 2.4% from 2.6%. Annual growth in 2023 is now expected to be 1.6%, down from 2.2%.

“Our financial conditions index has tightened by more than 100 basis points, which should be a drag of about 1 percentage point on GDP growth,” said Goldman Sachs economist Jan Hatzius.

“We expect the recent tightening in financial conditions to persist, in part because we think the Fed will deliver on its pricing.”

Futures imply a 50bps rate hike in June and July, with rates rising by 2.5-3.0% by the end of the year from the current 0.75-1.0%.

Bonds rose last week on fears that tightening would lead to a recession, with the 10-year yield down 21 basis points from a peak of 3.20%. Yields fell again to 2.91% earlier on Monday.

The pullback took the dollar off two-decade highs, albeit modestly. The dollar index was last at 104.560, not far from a high of 105.010.

The euro was at $1.0403, having traded as low as $1.0348 last week. USD/JPY did fall, with the yen appearing to gain safe-haven bids to 129.02 after the release of the Chinese data.

In crypto, bitcoin recently gained 2% to $30,354, hitting its lowest point since December 2020 last week after the collapse of the so-called stablecoin TerraUSD.

In commodity markets, gold, which was pressured by high yields and a strong dollar, fell 3.8% last week and was last at $1,809 an ounce.

Oil prices reversed as dire Chinese data reignited fears over demand.

Brent crude fell $2.31 to $109.24, while U.S. crude fell $2.14 to $108.35.

Reporting by Wayne Cole; Editing by Sam Holmes and Clarence Fernandez

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