Stocks fall on weak China data

BLOOMBERG

Markets fell broadly after Swedish landlord SBB halted dividends and economic data from China was weaker than expected. European stocks and US futures traded lower, along with oil. SBB shares lost 5.5%, adding to a 20% plunge on May 8, with investors increasingly worried about the effects of a funding squeeze across the real estate industry.
Sentiment was also hurt by a report showing a steep drop in Chinese imports in April, a sign that the economy’s recovery from Covid lockdown isn’t as strong as many had hoped. The Hang Seng Index shed more than 2%.
Investors are tracking efforts in Washington to end a standoff over the US debt ceiling, with President Joe Biden due to sit down with House Speaker Kevin McCarthy for their first meeting in three months as the two face pressure to forge a deal. “Whilst we expect a last-minute resolution to the US debt-ceiling melodrama, anxiety is now starting to creep into markets,” said John Leiper, chief investment officer at Titan Asset Management.
On the data front, the big focus in markets is the monthly US inflation report. Economists expect headline consumer price index (CPI) to rise by 5% on a year-on-year basis, showing that price pressures are still uncomfortably high for the Federal Reserve.
The yield on two-year Treasuries held just below 4%. Treasuries were also supported by the concerns around the US debt ceiling stalemate. An index of dollar strength was little changed.  Among individual stocks, there were some standout winners. Palantir Technologies Inc rallied as much as 21% in US pre-market trading after saying that demand for its new artificial intelligence tool is “without precedent.”
PayPal Holdings Inc dropped after lowering its guidance. PacWest Bancorp sank 12% amid lingering worries about the health of US regional banks.
In European stocks, JPMorgan Chase & Co strategists are calling time on the outperformance. Europe benefited from China’s reopening and a less-severe energy crisis than initially anticipated, but JPMorgan said these tailwinds are showing signs of fading, with economic surprises in the region now turning negative.  After euro-zone stocks rose in the past seven months, investors “should be locking in these gains,” strategists led by Mislav Matejka wrote in a note.
S&P 500 futures fell as much as 0.3% in New York and the Nasdaq 100 futures fell 0.4%. While futures on the Dow Jones Industrial Average fell 0.3%, the Stoxx Europe 600 fell 0.6% and the MSCI World index also drops 0.2%.
The Bloomberg Dollar Spot Index was little changed and the euro declines 0.2% to $1.0980. While the British pound was little changed at $1.2619, the Japanese yen climbs 0.2% to 134.84 per dollar.
The yield on 10-year Treasuries declined three basis points to 3.48% and Germany’s 10-year yield declined three basis points to 2.29%. Britain’s 10-year yield advanced two basis points to 3.80%.