The dollar strengthened on Wednesday as investors considered the prospect for Federal Reserve interest rates, while the world’s stocks declined after slowing growth in China and Europe raised fears about the direction of the global economy.
By 08:45 GMT, MSCI’s broadest index of global stocks had decreased 0.1%.
Fears of a worldwide economic downturn and rising petroleum costs drove down European stocks, extending losses for a sixth straight session.
By 0845 GMT, the pan-European STOXX 600 index had fallen to a weekly low of 0.8%.
According to the federal statistics agency, German industrial orders decreased in July more than was anticipated. Retail sales figures and Euro zone building PMIs are due later today.
Before it was anticipated that China’s exports shrank more slowly in August, the Hang Seng Index and China’s benchmark CSI300 Index both closed down 150 points and 0.22%, respectively, in Asia.
After a private sector survey on Tuesday revealed that services activity expanded at the weakest pace in eight months in August, showing weak demand, investor mood in China also weakened.
According to Bruno Schneller, managing director of INVICO Asset Management, “key risks that could undercut equity sentiment in September include developments in China’s property market and potential increases in food and energy prices.”
In the upcoming days, hina plans to disclose data on lending and inflation.
Any discussions about further cuts in oil production, according to Schneller, are another cause for worry because they would rekindle inflationary fears and undermine investor confidence.
After Saudi Arabia and Russia both announced they would prolong supply restrictions through the end of 2023, the price of Brent crude futures topped $90 per barrel on Tuesday. As of 08:45 GMT, the prices of Brent and U.S. West Texas Intermediate oil futures were both down more than 60 cents at $89.37 and $86.05, respectively.
The loss in manufacturing activity in Germany, Britain, and the euro zone as well as the contraction of their service sectors added to the gloomy atmosphere.
“The data for Europe were not very strong. According to Redmond Wong, Greater China market strategist at Saxo Markets, there is still a strong likelihood that the U.S. and Europe will experience a slight recession at the end of this year or the start of the following year.
Over $36 billion in new corporate bond issuance is expected to hit the market this week, and $120 billion in investment grade dollar-denominated issuance is anticipated this month, noted Jim Reid, a strategist at Deutsche Bank, as the United States returned from its Labour Day holiday.
Investors hedging the interest rate risk then put pressure on US Treasury yields, according to Reid in a note.
On Wednesday, US 10-year Treasury yields decreased by as much as 2.6 basis points to a low of 4.242% after reaching a session high of 4.274%, the highest level since August 25. In contrast, the US dollar increased earlier in the day to a level that was over six months high versus a basket of currencies.
Investors are analysing recent indications of impending increases in U.S. interest rates. The most recent set of economic data, according to Fed Governor Christopher Waller, is providing the American central bank room to decide whether or not to raise interest rates once more.
On Wednesday, the Institute for Supply Management (ISM) releases the U.S. services PMI.