European equities started the week on a soft note as investors worried that global economic growth could be hurt by central banks’ determination to keep inflation under control.
The regional Stoxx 600 fell 0.5% at the open on Monday, while the German Dax index lost 0.2% and the FTSE 100 lost 0.6%. Trade in Asia was weak, with Japan, South Korea and Taiwan closed for public holidays.
European stocks followed declines in the United States late Friday, when domestic labor market data showed continued strong job growth, deflating hopes the Federal Reserve would scale back interest rate hikes. The S&P 500 closed down 2.8% on Friday, with the tech-heavy Nasdaq losing 3.8%, after U.S. employers added 263,000 new jobs in September, down from 315,000 in August but above Wall Street expectations.
On Monday, stock futures trading pointed to further declines on Wall Street, with contracts trailing the S&P down 0.6% and those trailing the Nasdaq 100 down 0.6%.
Shares of Chinese chipmakers sold off on Monday, after Washington launched new export controls to curb Beijing’s plans for technological self-sufficiency by limiting sales of semiconductors made with American technology unless sellers do not obtain an export license.
China’s CSI 300 index lost 2.2%, while Hong Kong’s Hang Seng lost 2.8%, with Semiconductor Manufacturing International Corp, China’s largest chipmaker, down more than 3%.
Investors will await more inflation news this week, with the Fed releasing minutes from its September meeting on Wednesday.
Elsewhere, gilts reacted muted to the expansion of the Bank of England’s gilt-buying program designed to shore up sovereign debt markets, which ended after UK Chancellor Kwasi Kwarteng’s financial statements last month raised concerns about the country’s debt levels.
A series of unfunded tax cuts caused wobbles in the government securities market, exacerbated by pension funds selling UK sovereign bonds to maintain hedged positions, sending yields skyrocketing.
On September 28, the BoE pledged up to £5 billion in daily asset purchases until October 14 to support the market. On Monday it raised that threshold to £10bn and said it would confirm its maximum bid size each morning for the remaining week of the scheme.
Gilts had a muted reaction to the intervention, which bolsters gilt demand for funds selling UK sovereign debt. The 10-year yield rose 0.08 percentage point to 4.23%, while two-year yields added 0.12 percentage point to 4.18%, as the price of the instrument fell. fall.
Elsewhere in sovereign debt markets, the yield on the German 10-year Bund fell 0.05 percentage points to 2.15%.
In currencies, the dollar traded flat against a basket of six peers, with the pound rising 0.2% against the greenback to trade at $1.11.
Additional reporting by Hudson Lockett in Hong Kong