Oil prices and stocks fell on Monday as disappointing economic data from the US and China complicated the economic outlook and prompted a move 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 leading economies fueled fears that a slowdown in global growth will hit industrial and consumer demand. US marker West Texas Intermediate fell a similar range to $87.86, its lowest level since February.
On Wall Street, US stocks slid 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 closed its fourth straight week of gains on Friday.
Monday’s poor performance came after Chinese economic data showed that retail sales rose 2.7 percent year on year in July, while industrial production was up 3.8 percent. Economists had forecast larger gains of 5 percent and 4.6 percent, respectively.
Analysts at Goldman Sachs said the data suggested the growth recovery since the April and May lockdowns fueled by the Omicron Covid variant “has stalled, even reversing slightly in July.”
“This points to still weak domestic demand amid the 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.
To spur growth, China’s central bank cut its medium-term lending rate, which it uses to lend one-year to the banking system, by 0.1 percentage point to 2.75 percent on Monday.
“Traditionally, the Chinese economy has been an important pillar in supporting the global economy. This time, the US and Europe are showing signs of slowing down and possibly 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 for August showed a minus 31.3 versus 11.1 the previous month. Economists polled by Reuters had forecast a value of 5. The unexpected move in the Empire State gauge marked the index’s second-largest monthly decline on record.
In bond markets, the yield on the 10-year Treasury fell 0.08 percentage point to 2.77 percent as the reference instrument rose in price. US Treasury bonds are typically seen as a haven in times of economic stress.
Treasury prices had risen last week as new data showed signs that inflation in the world’s largest economy could be stabilizing, a trend that investors are watching closely when trying to gauge how far the Fed will raise interest rates will increase to curb the rapid price growth.
Market participants will be scouring minutes of the Federal Open Market Committee’s most recent monetary policy meeting for clues to the central bank’s tightening plans on Wednesday, after Fed officials suggested last week that encouraging data doesn’t necessarily mean inflation is being tamed had been.
The EU, Japan and Canada are also due to release inflation data this week, while results from the likes of Walmart and Target will provide further indicators of US consumer sentiment. Weak Guard Rail gains in May sparked some of the biggest declines for US stocks this year.
In the currency markets, the dollar gained 0.6 percent against a basket of six major currencies. In Europe, the regional stock index Stoxx 600 traded largely unchanged. Elsewhere, Chinese stocks fell, with the CSI 300 gauge of Shanghai- and Shenzhen-listed stocks finishing down 0.1 percent and Hong Kong’s Hang Seng Index slipping 0.7 percent.