Global stocks are down on Monday as the prospects of Fed interest rate cuts are worsening amid the strong labor data.
The US stock futures followed the negative trends on Asian and European markets amid investors’ doubts that the Federal Reserve would cut interest rates as much and as quickly as expected.
Strong US jobs data on Friday reduced market expectations for rate cuts from the US central bank at its next meeting in July. Meanwhile, industrial production and trade data from Germany remained weak in May after April’s sharp contraction, suggesting that economic growth continues to slow in the heart of Europe.
Asian markets recap
The main stock indexes of the Asia-Pacific region ended today’s trading session with declines as hopes for a possible cut in the US interest rates by the Federal Reserve were diminished by positive labor market data.
In China, the mainland index Shanghai Composite declined by 2.42% to 2,938.12 points. The Hong Kong’s benchmark Hang Seng fell by 517.73 points, or 1.80%, to 28,257.10 points.
In Japan, the blue-chip index on Tokyo Stock Exchange, Nikkei 225, wiped out 212.03 points, or 0.98%, to 21,534.35 points. Japanese orders for machine building companies dropped by 7.8% in May compared to the previous month, and this was the first decline in the benchmark for the past four months. The fall is sharper than the average forecast of a 4.5% drop by analysts surveyed by Nikkei Business Daily, followed by an increase of 5.2% in April. Major orders for the private sector, which exclude variable categories like ships, fell to 842.9 billion JPY (7.8 billion USD), according to official data. Despite the decline, the main assessment is maintained on the basis that the orders for machine building “show signs of growth”.
The South Korean index Kospi posted a decline of 46.42 points, or 2.20%, to 2,064.17 points. Samsung Electronics declined by more than 2%. On July 1, the Japanese government decided to tighten export controls for South Korea on certain materials needed to produce plumbing and various electronic devices. Separate permits must now be issued for their supplies. Relations between Tokyo and Seoul sharply increased as the Supreme Court of the Republic of Korea issued a decision challenged by Tokyo in the autumn of 2018. According to it, four former workers of Japan’s Nippon Steel && Sumitomo Metal must be compensated for the fact that during the Second World War they were forced to be mobilized and forced to work hard in one of the company’s subsidiaries. Of the four plaintiffs, only one is alive today. The Japanese government does not accept such judgments and claims that the question of compensation has been finally resolved in the normalization of relations between Tokyo and Seoul as early as 1965.
In Australia, local S&P ASX 200 declined by 79.10 points, or 1.17%, to 6,672.20 points.
European markets mid-session recap
European shares declined on Monday on sobering expectations of an aggressive interest rate cut this month by the US Federal Reserve, but the losses were limited. The pan-European Stoxx 600 declined by 0.08% to 389.82 points. Defensive stocks and financials weighed on the benchmark as it extended last session’s decline after strong U.S. jobs data saw investors trimming bets of a 50 basis point interest rate cut by the Federal Reserve in July.
German index DAX 30 inched lower by 10.34 points, or 0.08%, to 12,558.19 points at 10:00 GMT. The shares of Deutsche bank flattened after earlier touched their highest level since early May after it announced a restructuring plan that will cost 7.4 billion EUR (8.3 billion USD) and see it undo years of work that had aimed to make its investment bank a major force on Wall Street.
French index CAC 40 is down by 0.16% to 5,584.75 points. The stocks of carmakers are mixed with Renault edging lower by 0.7%, while Peugeot climbed 0.5%. The situation with financial stocks is the same as the stocks of BNP Paribas being down by 0.2% and Societe Generale gaining 0.9%.
British index FTSE 100 is down by 10 points, or 0.13%, to 7,543.15 points. Imperial Brands added 2.8% and sat at the top of the main UK index after the tobacco company announced plans for a 200-million-pound buyback and said it would revise its dividend policy. Rival British American Tobacco rose by 1.7%, providing the biggest boost to the index. Miners added to the broader gains as they snapped a three-day losing streak. The mining index had slipped last week after China’s top steel mills formed a group to probe a record surge in ore prices.
Wall Street pre-session recap
Wall Street stock futures are trading lower on Monday morning as strong jobs data dampened expectations that the Federal Reserve will cut interest rates anytime soon.
As of 6:00 a.m. ET, Dow futures indicated a drop of more than 95 points at the open. S&P 500 and Nasdaq futures were also in negative territory.
The investors will focus on the consumer credit figures, which are due at 3 p.m. ET.