European and Asian stocks weaken on China property worries

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European stocks followed Asia lower on Monday, as fears over the health of China’s property sector aggravated investors’ concerns that global economic growth was slowing.

Europe’s region-wide Stoxx Europe 600 fell 0.6 per cent, while France’s Cac 40 declined 0.5 per cent and Germany’s Dax lost 0.7 per cent. Basic materials and consumer cyclical stocks led the decline in the region.

The moves echoed Chinese markets, where declines in the country’s once-dominant property sector dragged Hong Kong’s Hang Seng down 1.8 per cent and the CSI 300 down 0.7 per cent.

Markets were shaken by news that Chinese property giant Evergrande could not issue new debt owing to an investigation into its principal subsidiary, Hengda Real Estate Group. Its shares dropped by more than a fifth and came two days after it warned that it was cancelling some creditor meetings to reassess terms for its restructuring.

The downturn reverberated across China’s faltering property market, with developer Longfor down 6.5 per cent, and Country Garden giving up 7.7 per cent. The Hang Seng Properties index lost 4.3 per cent in Hong Kong.

China’s property sector, which normally accounts for more than a quarter of activity in the world’s second-largest economy, has stumbled since the start of the year as consumer demand struggled to recover after three years of severe pandemic restrictions. 

Concerns over China’s economy compounded an already sour sentiment among traders, who digested the Fed’s recent guidance that interest rates would probably remain high next year, while the central bank worked to bring inflation back to its 2 per cent target. 

Yields on the benchmark 10-year US Treasuries rose 0.05 percentage points to 4.49 per cent on Monday, having last week reached their highest level in 16 years. Bond yields rise as prices fall. 

Contracts tracking Wall Street’s benchmark S&P 500 were flat and those tracking the tech-focused Nasdaq 100 declined 0.1 per cent ahead of the New York open.

Investors prepared for data on inflation in the eurozone this week, in the hope of gauging policymakers’ plans for future rates, amid growing concerns that recent oil supply cuts could fuel a second wave of inflation across the world. 

Brent crude, the international oil benchmark, gained 0.2 per cent to trade at $93.48 a barrel on Monday, while the US equivalent West Texas Intermediate, advanced 0.1 per cent to $90.11 a barrel. Both remained near their highest levels since November 2022.