London — World shares and the dollar slipped on Monday as growth concerns tested investor nerves at the start of a week of central bank meetings from the US and Japan to Scandinavia, Switzerland and Britain.
The pan European index slipped 0.6%, dragged down by healthcare, bank and chip shares, while trade in US stocks futures pointed to a flat open on Wall Street later on.
Shares in Société Générale slumped more than 9% and were set for their biggest one-day fall since March. France’s third-biggest listed bank said it expected little if any growth in annual sales over the coming years in a keenly-awaited strategic plan from its new CEO.
China property woes, geopolitical tensions and ongoing strikes also stoked worries about global growth.
Shares of property developer China Evergrande Group plunged 25% on Monday after police detained some staff at its wealth management unit. Fellow developer Country Garden faced yet another liquidity test with a deadline to pay $15m in interest linked to an offshore bond.
Technology shares in Asia retreated, with Taiwan’s TSMC , the world’s top contract chipmaker, falling 3% after Reuters reported that it has told its major suppliers to delay the delivery of high-end chipmaking equipment.
The disappearance of China’s defence minister heightened uncertainty about President Xi Jinping’s stance on international engagement, worker strikes impinged on global production and the spectre of a US government shutdown returned.
“Bad news stories on the growth side will add to the risk averse feeling that has been a backdrop,” said James Rossiter, head of global macro strategy at TD Securities in London.
TD Securities’ models predicted a slowdown in growth later in 2023 that central banks might have to eventually counter by easing rates, said Rossiter, adding: “It’s only natural that markets would begin to test that.”
The Euro Stoxx Volatility Index was set for its biggest one-day jump in a month, in a sign of growing volatility in world markets as central banks reach a turning point in monetary policy.
MSCI’s broadest stock index fell 0.2%, while Asia shares outside Japan dipped 0.1%. Japan’s Nikkei was closed for a public holiday.
Oil prices hit fresh 10-month peaks, further stoking inflationary pressures. Brent crude futures rose 0.6% to $94.53 per barrel and US West Texas Intermediate crude futures gained 0.9% to $91.47.
“While higher energy may be inflationary in the first instance, it is a headwind to economic activity, and has been often understood as such by the Federal Reserve,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Global central banks take centre stage, with five of those overseeing the 10 most heavily traded currencies holding rate-setting meetings this week. A swathe of emerging market central banks such as Turkey and SA will also meet.
Markets are fully priced for a second straight pause from the Fed on Wednesday, with its targeted range expected to be unchanged at 5.25% to 5.5%, so the focus will be on the updated economic and rates projections. They see about 80 basis points of cuts next year.
Analysts at Goldman Sachs reckon the Fed will also pause in November.
On Thursday, the Bank of England is tipped to hike for the 15th time and take benchmark borrowing costs to 5.5%.
The Bank of Japan is the key risk event on Friday. Markets are looking for any signs that it could be moving away from its ultra-loose policy faster than previously thought, after recent comments by Governor Kazuo Ueda sent yields much higher.
US treasury yields edged higher in Europe, with the two-year above the 5% threshold.
In currency markets, the dollar drifted lower with the dollar index last down a touch at 105.24 but within sight of recent six-month highs.
The euro gained about 0.1% to $1.0663, after slumping to a three-and-a-half-month low of $1.0632 last week as the European Central Bank signalled its rate hikes could be over.
Against the yen, the dollar was also a tad softer at ¥147.59.
The price of gold rose 0.15% at $1,925.60/oz.