Europe Stock Futures Fall After China Retail Data: Markets Wrap

This content was published on December 16, 2024 - 07:59

5 minutes

(Bloomberg) — European stock futures suggest shares across the region may open lower after Chinese equities slipped following disappointing retail-sales data.

Traders in Europe may also be cautious after Moody’s Ratings cut France’s credit grade and before a vote of confidence on German Chancellor Olaf Scholz. A loss for Scholz may trigger snap elections, just as Germany faces a declining economy and a narrowing growth potential. US stock futures were little changed.

“Fiscal support to the Germany economy will require time to take shape as the formation of a new coalition government could take weeks or months,” Brown Brothers Harriman strategists led by Win Thin wrote in a note to clients. “That means the European Central Bank will have to do the heavy lifting,” they said.

The tepid start for equity markets Monday comes as investors ready themselves for the final full week of trading this year with a series of central bank meetings including the Federal Reserve, Bank of Japan and Bank of England. Some investors may also decide to take profit on this year’s almost 20% rally in global stocks.

MSCI’s Asian equity gauge fell for a second day, weighed by a drop in Chinese shares after disappointing retail-sales data showed the world’s second-biggest economy is still struggling to recover. Benchmarks in Australia and Japan also slipped, with materials and consumer discretionary stocks leading regional declines. A gauge of Asian currencies slid to a two-week low.

While China’s retail sales increased 3% from a year ago, that fell short of forecasts of 5% growth by economists surveyed by Bloomberg. The nation’s stocks had already slumped on Friday amid disappointment after Beijing pledged to boost consumption but failed to offer details on fiscal stimulus.

The retail-sales data “is a reflection of the dire situation there and how the stimulus efforts have prioritized optics over delivering meaningful economic improvements,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Even for a tactical recovery, we need more after a series of false starts and the risk of tariffs ahead.”

Korean stocks swung to a loss after opening higher following the impeachment of President Yoon Suk Yeol on Saturday. The nation’s Constitutional Court has started reviewing the case, while investigators reportedly plan to question him this week over his shock martial law declaration.

“The rapid impeachment vote removes near-term uncertainty and could provide short-term relief to sentiment,” Kathleen Oh, an economist at Morgan Stanley, wrote in a note to clients. If events proceed swiftly toward fresh elections “we see limited impact on the real economy although downside risk remains if uncertainty persists longer than the previous cases of two-to-three months,” she said.

Bloomberg’s dollar index snapped a six-day gain, while Treasuries ticked higher as traders positioned before the Fed’s rate decision on Wednesday. Swaps traders are now pricing in around three quarter-point rate cuts over the next 12 months. A week ago they had seen better than 50/50 odds of a fourth one.

Bitcoin rose more than 3% at one point on Monday in Asia to a record $106,493, exceeding its previous peak from Dec. 5. The advance helped to boost sentiment in the wider crypto market.

In commodities, oil was little changed after a weekly advance as the US signaled tighter sanctions on Russian crude and Chinese authorities vowed to shore up the nation’s economy. Gold was little changed.

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