Oil prices and stocks fell on Monday as disappointing economic data from the United States and China complicated the economic outlook, prompting a shift away from riskier assets.
International oil benchmark Brent crude fell 5 percent to $93.16 a barrel as gloomy economic reports from the world’s two main economies added to concerns that a slowdown in global growth will hit the industrial and consumer demand. U.S. benchmark West Texas Intermediate fell by a similar margin to $87.86, its lowest level since February.
On Wall Street, U.S. stocks fell after the opening bell, with the S&P 500 down 0.5 percent and the tech-heavy Nasdaq Composite down 0.2 percent. The broad S&P had closed its fourth consecutive week of gains on Friday.
Monday’s weak performance came after Chinese economic data showed retail sales rose 2.7 percent year-on-year in July, while industrial production was 3.8 percent higher. Economists had forecast larger increases of 5% and 4.6%, respectively.
Analysts at Goldman Sachs said the data indicated that the recovery in growth from the April and May lockdowns spurred by the Omicron Covid variant “stalled and even reversed slightly in July”.
“This points to still weak domestic demand amid sporadic Covid outbreaks, production cuts in some energy-intensive industries and [the] adverse impact of recent risk events in the real estate sector,” they added.
In a bid to boost growth, China’s central bank on Monday cut its medium-term lending rate, through which it provides one-year loans to the banking system, by 0.1 percentage point to 2.75 per one hundred.
“Overall, the Chinese economy has been an important pillar to support the global economy. This time, the United States and Europe are showing signs of slowing down and possibly entering a recession, but the backdrop, China , is not there to support the global economy,” said Aneeka Gupta, director of macroeconomic research at WisdomTree.
Later in the day, a New York Federal Reserve survey of manufacturers came in at minus 31.3 for August from 11.1 the previous month. Economists polled by Reuters had forecast a reading of 5. The unexpected move in the Empire State gauge marked the index’s second-biggest monthly drop on record.
In bond markets, the yield on the 10-year U.S. Treasury note fell 0.08 percentage point to 2.77% as the price of the benchmark rose. US government debt is often seen as a safe haven asset in times of economic stress.
Treasury prices had risen last week as new figures offered signs that inflation in the world’s largest economy could be steady, a trend closely watched by investors as they try to gauge how far the Fed will raise rates of interest to curb the rapid growth of prices.
On Wednesday, market participants will scrutinize the minutes of the Federal Open Market Committee’s latest monetary policy meeting for clues about the central bank’s tightening plans, after Fed officials suggested last week that data encouraging did not necessarily mean that inflation had been tamed.
The EU, Japan and Canada will also release inflation data this week, while results from companies such as Walmart and Target will provide further indicators of US consumer sentiment. Weak earnings from bellwethers in May led to some of the biggest declines in US stocks this year.
In currency markets, the dollar gained 0.6% against a basket of six major currencies. In Europe, the regional Stoxx 600 share index traded broadly higher. Elsewhere, Chinese shares fell, with the CSI 300 gauge of shares traded in Shanghai and Shenzhen closing up 0.1% and Hong Kong’s Hang Seng index falling 0.7%.
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