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Global stocks fall on weak China manufacturing data

Global stocks and US futures slipped on Wednesday, as poor economic data from China damped traders’ hopes for a swift post-pandemic recovery in the world’s second-largest economy.

Europe’s region-wide Stoxx 600 was down 0.2 per cent, Germany’s Dax lost 0.3 per cent, France’s Cac 40 fell 0.5 per cent and London’s FTSE 100 was flat.

The region’s markets were led lower by Asia, where China’s CSI 300 index fell 1 per cent after the country’s statistics bureau reported a contraction in manufacturing activity in May, defying analysts who had expected an expansion.

“Far from being the powerhouse which will offset America’s slowdown, China’s economic recovery from the pandemic is looking more precarious,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Hong Kong’s Hang Seng China Enterprises index dropped 2 per cent, bringing the benchmark more than 20 per cent lower from its recent peak in January and into bear market territory.

Meanwhile, preliminary data in Germany showed that annual consumer price inflation slowed to 6.1 per cent in May, down from 7.2 per cent in the previous month, adding to signs that price pressures are easing quickly across the region.

In France, inflation slipped to 6 per cent in May, its lowest level for a year, and below analysts’ forecasts, raising hopes that the European Central Bank is nearing the end of its tightening cycle.

Italy is set to post its inflation results later in the day, with the eurozone figures coming out on Thursday.

Meanwhile, contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 both fell 0.4 per cent ahead of the New York open.

The moves follow choppy trading in the previous session, as traders worried whether Congress would manage to pass the US debt ceiling deal before the government runs out of money in early June.

The bipartisan bill, agreed on Saturday, would raise the country’s $31.4tn debt ceiling for two years, but it first needs to pass both chambers of Congress, with traders poised for the vote in the House of Representatives later on Wednesday.

The yield on US Treasury bills that mature next month — at about the date the government could run out of money — eased to 5.2 per cent, having reached its highest level in at least 20 years last week. Bond yields rise as prices fall.

The pressure on longer-term Treasuries eased, with the yield on policy-sensitive two-year bills falling 0.05 percentage points to 4.43 per cent. The yield on the benchmark 10-year note was down 0.05 percentage points to 3.65 per cent.

“The bulk of the risk of the debt ceiling issue is off the table, the market is paralysed, it seems, until the issue is legally concluded,” said Mike Zigmont, head of research and trading at Harvest Volatility.

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