GLOBAL MARKETS – Global equities tumble as China’s economy unexpectedly stumbles

* European stocks break 10-day streak of gains

* Chart: Global Asset Performance http://tmsnrt.rs/2yaDPgn

* Chart: world exchange rates http://tmsnrt.rs/2egbfVh

By Ritvik Carvalho

LONDON, Aug. 16 (Reuters) – Global stocks fell on Monday after a series of Chinese economic indicators showed a surprisingly sharp slowdown in the engine of global growth, as did most of the global races to stem the spread of the Delta variant of COVID-19 with vaccines.

A 10-day streak of gains for European stocks came to a halt, with commodity-related stocks – which are sensitive to demand from China – falling the most. The pan-European STOXX 600 index was down 0.5% after midday in London, down from record levels last week.

July’s retail sales figures, industrial production and urban investment in China all missed forecasts, a trend that will only worsen given the recent tightening of coronavirus restrictions in that country.

July data was affected by massive flooding in China during this period, as well as movement restrictions within and at major export ports, to dampen the stubborn appearance of the Delta variant. , although in small numbers, ”said Jeffrey Halley, senior market analyst at OANDA.

“The latter is now weighing on the nerves of investors, especially when you look at the evolution of epidemics in the region, from Australia to Singapore to Japan and everywhere in between. If anyone can break the trend, it’s China. “

But epidemics and widespread restrictions would be a game-changer for the recovery in Asia and potentially beyond, given the likely impact on supply chains, Halley said.

The sudden collapse of the Afghan government and what it could mean for political stability in the region added to uncertainty among investors and bolstered defensive assets.

The MSCI All Country World Index, which tracks stocks from 49 countries, fell 0.3% on the day. US equity futures also traded lower, with E-minis for the S&P 500 and futures on the Nasdaq falling 0.3%.

Chinese blue chips cut some losses to close 0.1% lower, possibly in anticipation of more aggressive policy easing from Beijing.

“The data is likely to intensify speculation about further reductions in reserve requirements in the coming weeks and be positive for bonds,” TD Securities analysts wrote in a note.

“The central bank is also unlikely to welcome the appreciation of the CNY on a trade-weighted basis, while limiting the appreciation of the CNY against the USD.”

The Japanese Nikkei fell 1.7%, although economic growth exceeded expectations for the June quarter.

COOLING OF CONSUMERS

Wall Street set new records last week even as a survey showed a sharp drop in U.S. consumer confidence to its lowest since 2011 amid fears of the Delta variant. China’s dismal report and slowdown combined to push 10-year Treasury yields down to 1.25%, down 11 basis points in just two sessions.

This overall mood for risk also helped boost the dollar, pushing it back to 92.629, up 0.1% on the day against a basket of currencies.

The euro dipped 0.2% to $ 1.1774 and moved away from major chart support at $ 1.1740, while the dollar fell to 109.39 yen, leaving behind the high of 110, 79 of last week.

Kim Mundy, senior currency strategist at the CBA, argued that the dollar could recover this week if the minutes of the Federal Reserve’s latest policy meeting confirmed a hawkish turn on the cut.

The minutes are released on Wednesday as Fed Chairman Jerome Powell speaks on Tuesday.

“We expect the FOMC to announce that it will reduce its monthly asset purchases in September if the August payroll is strong,” Mundy said.

“We believe that a tapering announcement next month is not widely expected, so if the minutes show that the FOMC has discussed the possibility of announcing a tapering as early as September, we expect the dollar to rebound. “

In Asia, the Malaysian ringgit fell to its lowest level in a year following the resignation of Prime Minister Muhyiddin Yassin.

In the commodities markets, gold fell to $ 1,771 following a sudden drop in stop-losses to $ 1,684 early last week.

Oil prices have partly eased over concerns that coronavirus-related travel restrictions will hurt demand, particularly in China.

Brent fell 1.6% to $ 69.43 a barrel, while US crude fell 1.8% to $ 67.17.

(Reporting by Ritvik Carvalho; Additional reporting by Wayne Cole in Sydney; Editing by Catherine Evans and Chizu Nomiyama)


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