European and Asian stocks fell on Wednesday as the stalemate over the US debt ceiling deal dragged on, raising investors’ concerns over the fast approaching default deadline.
Europe’s region-wide Stoxx 600 lost 1.5 per cent per cent in early trade while Germany’s Dax lost 1.2 per cent and France’s Cac 40 shed 1.7 per cent.
The drop came on the heels of a sell-off on Wall Street after policymakers in Washington failed to lock in a deal to raise the debt ceiling, with less than two weeks before the US government is due to default.
Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 both fell 0.1 per cent ahead of the New York open.
London’s FTSE lost 1.5 per cent, after official data showed that consumer price inflation fell to 8.7 per cent in April, higher than the Bank of England’s 8.4 per cent forecast.
Core inflation, which excludes food and energy prices, jumped from 6.2 per cent to 6.8 per cent.
The yield on UK’s two-year bonds rose 0.27 percentage points to 4.40 per cent, its highest level since October 2022, when the “mini” Budget of then-chancellor Kwasi Kwarteng fuelled the downward spiral in gilt prices.
Meanwhile, China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 1.4 per cent, fully erasing gains from a rebound rally that had pushed the gauge up more than 10 per cent earlier in the year. In Hong Kong, the Hang Seng China Enterprises index fell as much as 2 per cent.
In commodities markets, Chinese iron ore futures in Dalian dropped as much as 4.5 per cent to Rmb683.5 a tonne, while copper contracts on the London Metal Exchange fell as much as 1.4 per cent to $7,988 a tonne, dropping below the $8,000 threshold for the first time in almost six months.
The latest falls for Chinese stocks and commodities follow disappointing economic figures suggesting the country’s recovery from stifling zero-Covid restrictions has begun to stall. Official data this month showed record joblessness among Chinese youth, with one in five unemployed.
“Most investors are not confident about the outlook for the Chinese market,” said Dickie Wong, head of research at Kingston Securities in Hong Kong. Wong said the Chinese government “really can’t do anything about youth unemployment at the moment”.
“Teenagers don’t want to work in the countryside or at factories, they want to work at Alibaba or Tencent,” he added, “but Chinese tech companies are reducing their workforces now.”
Alibaba shares were down 2.3 per cent on Wednesday after the company announced it was cutting 7 per cent of staff at its cloud business.
Elsewhere in the region, Japan’s Topix index — which this month hit its highest point since 1990 — shed 0.4 per cent, and Australia’s S&P/ASX 200 fell 0.5 per cent.
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