Growth jitters hit global stocks ahead of central bank-packed week

A woman walks past a screen displaying the Hong Kong Index in the Central District in Hong Kong, China on March 21, 2023. REUTERS/Tyrone Siu/File Photo Get license rights

  • Fed rate decision on Wednesday, BOE on Thursday, BOJ on Friday
  • US crude hits new 10-month dollar high
  • China slumped to 25% before Evergrande regained ground

SYDNEY, Sept 18 (Reuters) – Global shares fell on Monday as the dollar firmed as growth worries tested investors’ resilience a week ahead of central bank meetings in countries including Norway, Sweden, Switzerland, Britain, the United States and Japan.

The pan-European (.STOXX) index fell 0.5%, dragged by health care, banking and chip stocks.

Societe Generale ( SOGN.PA ), France’s third-largest listed bank, saw its shares fall more than 6% and are set for their biggest one-day fall since March. In the coming years, the bank said it expects any growth in annual sales from its new CEO’s eagerly anticipated strategic plan.

China’s asset woes, geopolitical tensions and ongoing strikes fueled concerns about global growth.

Shares in property developer China Evergrande Group ( 3333.HK ) fell 25% on Monday after police detained some employees at its wealth management division. Fellow developer Country Garden 2007. HK faced another liquidity test, owing $15 million in interest tied to an offshore bond.

Technology stocks retreated in the region, with Taiwan’s TSMC ( 2330.TW ), the world’s top contract chipmaker, falling 3% after Reuters said it had delayed deliveries of high-end chipmaking equipment to its key suppliers.

The death of China’s defense minister added to uncertainty about President Xi Jinping’s stance on international engagement, labor strikes disrupted global manufacturing and fears of a U.S. government shutdown returned.

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U.S. S&P 500 and Nasdaq futures rose 0.1%.

“Bad news on the growth side will add to the underlying risk aversion in markets,” said James Rossiter, head of global macro strategy at TD Securities in London.

DD Securities’ models predict a slowdown in growth later this year, which central banks may eventually have to counter by easing rates, Rossiter said.

“It’s only natural that markets start to test that,” he said.

MSCI’s broadest share index (.MIWD00000PUS) was down 0.15% by 0830 GMT, after European indexes started lower. Japan’s Nikkei (.N225) is closed for a public holiday.

Oil prices hit fresh 10-month highs, fueling inflationary pressures further. Brent crude rose 27 cents to $94.19 a barrel, while U.S. West Texas Intermediate crude futures added 37 cents to $91.13, their highest level since November.

Central Bank Spotlight

Global central banks are taking center stage, with five of the 10 most traded currencies holding rate-setting meetings this week. A portion of emerging market central banks will also meet.

Markets have fully priced in a second straight pause from the central bank on Wednesday, which is expected to keep its target range unchanged at 5.25% to 5.5%, so the focus will be on updated economic and rate forecasts. They see an 80 basis point cut next year.

“In theory, the FOMC meeting should be a less volatile affair, but this is a risk that needs to be managed,” said Chris Weston, head of research at Pepperstone.

Weston said if the Fed revised its rate forecasts for 2024, it would see rate cuts priced in, resulting in renewed interest in the dollar and downward pressure on global equities.

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On Thursday, the Bank of England will raise benchmark borrowing costs to 5.5% for the 15th time.

The Bank of Japan is the main risk event on Friday. After recent comments from Governor Kazuo Ueda, markets are looking for signs that the BOJ will rapidly move away from its ultra-loose policy.

US Treasury yields were higher in European trade, above the 5% threshold in two years.

In currency markets, the dollar was near its six-month high at 105.29 against a basket of major currencies.

The euro rose about 0.1% to $1.0663, after falling to a 3-1/2-month low of $1.0632 last week, as the European Central Bank signaled that its rate hikes may be ending.

Gold prices rose 0.1% to $1,924.10 an ounce.

Reporting by Nell McKenzie and Stella Qiu; Editing by Sri Navaratnam, Edwina Gibbs, Philippa Fletcher

Our Standards: Thomson Reuters Trust Principles.

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