Stock markets struggle amid fears over economy

LONDON (Reuters) – European stocks slipped on Monday and Wall Street was set for a lower opening, as investor sentiment struggled to recover from last week’s sell-off amid fears of a slowdown in economic growth.

Global shares hit their lowest point in 18 months last week, with investors worried that rising interest rates to counter high inflation will damage the global economy.

Unexpectedly weak economic data from China kept those worries in center stage on Monday. April retail sales plunged 11.1% on the year, almost twice the fall forecast, as full or partial COVID-19 lockdowns were imposed in dozens of cities. Industrial output dropped 2.9% when analysts had looked for a slight increase.

EUS stock index futures pointed to a lower open for Wall Street, with Nasdaq futures down 0.4% and S&P 500 futures down 0.3%.

“Inflation’s still relatively high… it’s something that keeps markets relatively unnerved. At the same time there’s more tightening coming from central banks,” said Antoine Lesne, head of ETF strategy and research for EMEA at State Street’s SPDR.

“It’s difficult to find a hedge against falling equities in this context,” Lesne said.

Some investors have been looking to buy the US dollar, gold, or shorter-duration fixed income, he said.

European government bond yields rose, with Germany’s 10-year yield up 4 basis points at around 0.988% – still below the roughly eight-year high of 1.19% it reached last Monday.

The European Central Bank will likely decide at its next meeting to end its stimulus program in July, and raise interest rates “very soon” after that, ECB policymaker Pablo Hernández de Cos said on Saturday.

“Investors have shown that their focus is increasingly on recession risk,” wrote ING rates strategists in a note to clients.

The economic growth concerns could allow government bonds to function as safe havens, ING said.

The dollar index, which last week surged to a 20-year high of 105.01, was down around 0.1% on the day at 104.41.

The euro was near its lowest since 2017. Sky-high inflation and rising interest rates drove US consumer confidence sink to an 11-year low in early May and raised the stakes for April retail sales due on Tuesday.

Oil prices slipped as investors took profit from a recovery in the previous session.

Bitcoin was trading at around $29,967. Last week it plunged to as low as $25,401.05.