European Stocks Drop as China, Fed Talk Sour Mood: Markets Wrap

European equities fell, tracking markets lower in Asia, as concern about local government debt in China and hawkish language from a US central banker put traders in a risk-off mood.

(Bloomberg) — European equities fell, tracking markets lower in Asia, as concern about local government debt in China and hawkish language from a US central banker put traders in a risk-off mood. 

The Stoxx 600 index dropped 0.5%, snapping two days of gains and trimming its fourth weekly advance in five. US equity futures were little changed and Treasury yields edged lower. The British pound led gains among G-10 currencies against the dollar after the strongest quarterly growth in more than a year. 

Markets were fragile after San Francisco Reserve Bank President Mary Daly said the Fed still has “more work to do” to combat rising prices, damping the impact of broadly positive inflation data on Thursday. In China, the government moved to manage local government debt, a key threat to the nation’s financial stability, while property developer Country Garden Holdings Co. predicted a multibillion-dollar loss for the first half of this year.

“The market remains priced for perfection,” Bank J. Safra Sarasin strategists led by Karsten Junius wrote. “Valuations remain elevated, even on the basis of optimistic 2024 consensus earnings numbers. These will be difficult to achieve in our base case scenario, which projects a slowing cycle well into next year.” Junius and colleagues said they’ve downgraded their year-end target for euro-area equities.

Read More: Risk-Off Extends With Cash Attracting Most Investor Flows: BofA

In currencies, the Bloomberg Dollar Spot Index was flat after rising Thursday. The greenback is set for a fourth week of gains, the longest such streak since February. Meanwhile, the Australian dollar’s continued depreciation is starting to increase fears of inflation. 

“Our view that USD upside is likely limited still holds,” said Christopher Wong, FX strategist at Oversea Chinese Banking Corp. The point of inflection “could come when the market narrative shifts into trading more rate cuts. And it could be several months out, dependent on how data pans out,” Wong added.

Australian, South Korea and Chinese equity indexes fell, with the Hang Seng technology index declining as much as 2.7%. All but one of the index’s 30 members dropped, with Alibaba Group Holding Ltd. the only advancer after it beat revenue estimates in its latest quarterly results. Country Garden’s declines have put an index of Chinese property developers on track for its worst week since October.

Biden Calls China’s Economy a ‘Ticking Time Bomb’ in Fresh Barb

In commodities, oil was on track to end the week little changed ahead of a report from the International Energy Agency.

Key events this week:

  • UK industrial production, GDP, Friday
  • US University of Michigan consumer sentiment, PPI, Friday

Some of the main moves in markets:


  • The Stoxx Europe 600 fell 0.5% as of 8:06 a.m. London time
  • S&P 500 futures rose 0.1%
  • Nasdaq 100 futures rose 0.2%
  • Futures on the Dow Jones Industrial Average rose 0.1%
  • The MSCI Asia Pacific Index fell 0.7%
  • The MSCI Emerging Markets Index fell 0.9%


  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.1% to $1.0994
  • The Japanese yen was little changed at 144.67 per dollar
  • The offshore yuan was little changed at 7.2468 per dollar
  • The British pound rose 0.3% to $1.2713


  • Bitcoin was little changed at $29,428.03
  • Ether was little changed at $1,848.34


  • The yield on 10-year Treasuries was little changed at 4.10%
  • Germany’s 10-year yield advanced five basis points to 2.58%
  • Britain’s 10-year yield advanced seven basis points to 4.43%


  • Brent crude fell 0.2% to $86.21 a barrel
  • Spot gold rose 0.2% to $1,916.52 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller and Wenjin Lv.

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