US technology stocks slipped on Wednesday, compounding losses for the week, as softening Chinese export data added to investors’ concerns that stalling global economic growth would crimp demand.
The tech-heavy Nasdaq Composite was 0.4 per cent lower in early New York trading, extending its declines after a strong sell-off in US equities this week. The benchmark S&P 500 was flat. In Europe the regional Stoxx 600 fell 0.3 per cent and London’s FTSE 100 was down 0.1 per cent, trading in a tight range.
Stock markets have fallen since a report from the Institute for Supply Management on Monday showed that its index, which tracks economic activity in the US services sector, expanded for the 30th month in a row in November, unnerving investors who expect the Federal Reserve to slow its interest rate rises when it meets later this month.
Brent crude oil fell as much as 1.8 per cent in early trade in London on fears of slowing demand, before recouping its losses to trade up 0.6 per cent. The international benchmark dropped 4 per cent in the previous session to its lowest level of the year, days after the imposition of sweeping western sanctions on Russia’s oil exports.
“Clearly, investors are not worried the least about any potential supply shortage that might be the result of the price cap and the EU ban on Russian oil sales,” said analysts at PVM oil brokerage in London.
Roger Diwan, an oil analyst at S&P Global Commodity Insights, said “the view right now is that Chinese demand is soft, and the volume of Russian oil exported will remain high”.
European gas prices rose on a cold weather snap, with TTF futures rising as much as 7 per cent. However, the global benchmark is roughly half of its August peak above €300 a megawatt hour.
Stocks in Hong Kong tumbled after data from China overshadowed Beijing’s move to ease its stringent zero-Covid policies, as authorities try to quell discontent and seek to revive the world’s second-largest economy.
China’s CSI index of Shanghai- and Shenzhen-listed shares slipped 0.2 per cent, while Hong Kong’s Hang Seng index lost 3.2 per cent following the release of November data showing China’s exports and imports both contracted by their biggest margins in several years.
The country’s exports in dollar terms fell 8.7 per cent year on year to $296bn, the biggest drop since the start of the pandemic and far above expectations of a 3.5 per cent drop. Its imports declined 10.6 per cent, the most in two and a half years.
The CSI index and the Hang Seng have nonetheless jumped 12 per cent and 30 per cent respectively since bottoming out in late October, as investors grew hopeful that China will begin reopening its constrained economy earlier next year. Beijing on Wednesday rolled back Covid-19 quarantine and testing requirements in an apparent concession to widespread protests last month.
“I see serious value, like I’ve rarely seen, in China and in Hong Kong, where [company] valuations and margins are very low, decimated by the Covid policy,” said Didier Rabattu, head of equities at Lombard Odier Investment Management. “And the government has totally changed its Covid strategy.”
The dollar has tumbled about 8 per cent since peaking in late September as investors have warmed to the idea that China is on the cusp of reopening, and as various measures of US inflation have shown signs of peaking. The dollar index, which measures the currency against six others, fell 0.5 per cent on the day.
US government bonds rallied on Wednesday after selling off sharply following the ISM release. The yield on the interest rate-sensitive two-year Treasury fell 0.08 percentage points to 4.27 per cent, while that on the benchmark 10-year note lost 0.06 percentage points to 3.45 per cent, down from a peak of 4.24 per cent in late October. Yields fall as prices rise.
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