European stocks extend losses as slowdown warnings weigh

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LONDON, Sept 16 (Reuters) – European stocks plunged on Friday and Europe’s benchmark German 10-year bond yield hit its highest since mid-June as investors braced for a U.S. rate hike as warnings from the World Bank and the International Monetary Fund fueled fears of a slowdown.

The World Bank’s chief economist said on Thursday he was worried about a period of low growth and high inflation in the global economy. The International Monetary Fund said downside risks continue to dominate the global economic outlook, but it’s too early to tell if there will be a broad-based global recession. Read more

Wall Street sold on Thursday after U.S. economic data gave the Federal Reserve little reason to ease its aggressive rate hike stance. Read more

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The pessimistic tone continued during Asian trading, with data showing that China’s property sector contracted further last month. Read more

As of 08:15 GMT, the MSCI World Stock Index, which tracks stocks from 47 countries, was down 0.5% on the day and set for its fourth consecutive day of losses. (.MIWD00000PUS)

The European STOXX 600 fell 1.2% (.STOXX) and London’s FTSE 100 (.FTSE) slightly lower by 0.1%. The German DAX fell 1.8% (.GDAXI). Read more

Markets have priced in a 75% chance of a 75 basis point rate hike and a 25% chance of 100 basis points when the Fed meets next Wednesday.

In the UK, retail sales fell more than expected, another sign that the economy is slipping into recession as the cost of living crisis squeezes disposable household spending. Read more

“We are now seeing data confirming that the economy is indeed slowing down,” said Axel Rudolph, market analyst at IG Group.

“I expect equities to fall back below their March lows. If you’re in an environment where central banks are aggressively raising rates, that has always led to bear markets.”

The pound weakened to its lowest level in 37 years against the US dollar. Read more

The US dollar index rose 0.3% to 110.13, still near a 20-year high, and stable against the yen at 143.365.

The yen could rush to three-decade lows before the end of the year, market analysts and fund managers say. Read more

Dollar strength pushed the Chinese offshore yuan past the 7 to the dollar level for the first time in nearly two years. Read more

The Euro was a bit lower at $0.9961. German two-year bond yields hit a new 11-year high after the vice president of the European Central Bank said an economic slowdown in the eurozone would not be enough to control inflation and the bank should continue to raise interest rates. Read more

Germany’s benchmark 10-year bond rose 3 basis points on the day to 1.765% – after hitting its highest level since mid-June in early trading.

Oil prices rose slightly but were on track for a weekly decline amid fears of reduced demand. Read more

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Reporting by Elizabeth Howcroft; Editing by Sherry Jacob-Phillips

Our standards: The Thomson Reuters Trust Principles.

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