European stocks fell on Wednesday as Germany’s economy went into reverse, reviving fears of global recession and tempering a rally for equities after Washington delayed tariffs on some Chinese imports.
Europe’s biggest economy shrank 0.1% in
the second quarter as the trade war and weak demand dragged on German
manufacturers The euro zone as a whole reported gross domestic product grew
just 0.2% in the same quarter.
The Euro STOXX 600 fell 0.4%. Markets in
London .FTSE, Frankfurt .GDAXI and Paris FCHI
lost from 0.2% to 0.6%. Wall Street futures gauges were also lower .
Bond markets
were also flashing warning signals of recession. The gap between U.S. two-year
and 10-year Treasury yields - a closely watched metric for signs of a slowdown
- fell to less than a basis point after shrinking on Tuesday to its narrowest
since June 2007.
The German
figures, along with data showing the slowest growth for Chinese industrial
output in 17 years stoking recession worries, knocked the wind out the sails
for stocks.
Equity investors
on Wall Street and Asia had cheered earlier when U.S. President Donald Trump
pushed back a Sept. 1 deadline for new tariffs on remaining Chinese imports.
The S&P 500 .SPX, which had fallen 1%
on Monday, rose 1.5% overnight, sending Asian stocks outside Japan up 0.6%.
Benchmarks in Shanghai, Hong Kong and Tokyo all mirrored the surge in U.S.
stocks.
But the momentum ebbed in Europe, as
optimism faded that Trump’s move meant tensions were easing and Germany’s
slowdown showed the damage already done by the trade war.
“The trade war
and the dispute between U.S. and China has already had an impact - especially
when you look at countries most sensitive to global trade like Germany and even
Italy,” said Christophe Barraud, chief economist and strategist at Market
Securities in Paris.
The MSCI world
equity index, which tracks shares in 47 countries, was flat.
- Reuters
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