Global share prices slide on fears of China slowdown

Global share prices have fallen after a surprisingly sharp slowdown in China dented confidence in a vaccine-led recovery. After a prolonged rise, stock markets reacted negatively to signs that tougher credit conditions and fresh outbreaks of Covid-19 were weighing on the world’s second-biggest economy. London’s FTSE 100 dropped by just under 1% after Beijing released much softer than expected data for Chinese industrial production and retail sales. The sensitivity of commodity stocks to Chinese demand meant Glencore, Anglo American, Antofagasta and Rio Tinto were among the 10 biggest fallers on the FTSE 100, which closed 65 points lower at 7, 154 points. Share prices on the Frankfurt, Paris and Milan exchanges were lower, while the Euro Stoxx 600 index – which measures share prices on 17 separate European markets – fell by 0. 5% after hitting record highs last week. The impact of China’s economic slowdown rippled from Europe to North America, where sentiment was also affected by the Taliban takeover of Afghanistan. But after slipping in early trading the Dow Jones industrial average and the more broadly based S&P 500 recovered to close at record highs. News that refining activity in China had fallen pushed oil prices lower amid concerns that Beijing’s attempts to rein in credit growth was leading to weaker demand for crude. Yields on government bonds dropped as investors reassessed the prospects for global growth and inflation. Yields tend to rise when there is an expectation of strong growth and upward pressure on prices. Although China’s industrial production was 6. 4% higher in July than a year earlier, the annual rate of increase declined from 8. 3% in June and was well down on the 7. 9% financial market consensus. The global shortage of computer chips meant car production was down 8. 5%. Similarly, annual retail sales growth dropped from 12. 1% in June to 8. 5% in July, well below the consensus forecast for a 10. 9% increase. Sales of smartphones were up only 0. 1% after a jump of 15. 9% in the year to June. Fu Linghui, a spokesman for China’s National Bureau of Statistics, said the country’s recovery remained uneven because of sporadic outbreaks of the coronavirus, and natural disasters. “The domestic economic recovery still faces many challenges, and constraints on production increased, ” he said. Julian Evans-Pritchard, a China analyst for Capital Economics, said the slowdown could only partly be blamed on pandemic flare-ups and floods in central regions of the country. “Investment spending and industrial activity, which are less sensitive to virus restrictions, also weakened markedly, suggesting that tighter credit conditions are biting, ” he said. “The drop back in consumption should reverse once the virus situation is brought under control and restrictions are lifted. But we think the slowdown elsewhere will deepen over the rest of the year. ”