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US stocks slip as China’s weak export data spark economic growth fears

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US technology stocks slipped on Wednesday against a backdrop of concerns about global growth as investors weighed weak Chinese export data against hopes that Beijing will ease further strict Covid-19 restrictions.

The tech-heavy Nasdaq Composite was 0.4 per cent lower in afternoon trading in New York, extending its declines after a strong sell-off in US equities this week. The benchmark S&P 500 had slipped 0.2 per cent.

This week’s stock market falls have also followed a report from the Institute for Supply Management on Monday showing that its index, which tracks economic activity in the US services sector, in November expanded for the 30th month in a row. It unnerved investors who have been expecting the Federal Reserve to slow its interest rate rises when it meets later this month.

US government bonds rallied on Wednesday. The yield on the interest rate-sensitive two-year Treasury fell 0.09 percentage points to 4.27 per cent, while that on the benchmark 10-year note lost 0.07 percentage points to 3.44 per cent, down from a peak of 4.34 per cent in late October. Yields fall as prices rise.

Wall Street’s moves on Wednesday come after 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 0.3 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 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 coronavirus 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.

Brent crude oil fell 2.5 per cent in volatile trading to $77.38 a barrel. 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 6.2 per cent to €149.75 a megawatt hour. However, the global benchmark is trading at less than half of its August peak above €300 a megawatt hour.

Despite losing ground on Wednesday, the CSI index and Hang Seng have nonetheless jumped 13 per cent and 28 per cent respectively since bottoming out in late October, as investors have grown 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.

In Europe the regional Stoxx 600 fell 0.6 per cent and London’s FTSE 100 was down 0.4 per cent, trading in a tight range.

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