World stocks drift off recent highs over global growth worries

London — World stock markets nudged away from six-month highs on Thursday as investors weighed warning signs over growth from major central banks and as concern over protectionism rumbled, with the dollar and euro holding steady.

Sterling also traded flat after EU leaders gave Britain another six months to leave the bloc, with the latest pause in the Brexit process turning investors’ focus to the health of the British economy.

European markets made a subdued start, mirroring a disappointing day for Asian bourses that broke four days of gains. European stocks fell 0.4%, with bourses in London and Frankfurt losing ground, though Paris held steady.

Equities and other risky assets have been volatile this year, while bonds have rallied over worries of a recession in the US and the risk of a sharper slowdown in other major economies including the eurozone.

Against that backdrop, many central banks have taken a dovish policy twist, pivoting away from moves towards interest rate hikes. The US Federal Reserve will likely leave rates unchanged this year, minutes from its policy meeting last month showed, given risks to the US economy from financial conditions and protectionist trade policies. The European Central Bank (ECB) maintained its loose policy stance on Wednesday, highlighting threats to global growth and raising the prospect of more support being pumped into the struggling eurozone economy.

Looming in the background have been concerns of a retreat to protectionism, with US President Donald Trump threatening new tariffs on the EU n while the China-US trade dispute rumbles on.

The world’s two biggest economies have largely agreed on a mechanism to police any trade agreement they reach, including establishing new “enforcement offices”, said US treasury secretary Steven Mnuchin, with talks due to resume on Thursday.

“We do expect US growth to remain relatively tepid this year compared to what we saw last year, and it will probably lose further momentum as we head towards the end of the year,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.