(Bloomberg) — European stocks dropped, tracking an overnight tech-led decline on Wall Street, as China’s pledge to support its economy disappointed investors hoping for new stimulus.
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The Stoxx 600 index fell 0.8%, led by declines in miners and luxury stocks, the sectors most exposed to the Chinese economy. Kering SA and Burberry Plc slumped more than 5%. Widely anticipated stimulus measures were absent from a press conference in Beijing, where officials vowed to meet economic targets. A gauge of Chinese stocks in Hong Kong tumbled the most intraday since 2008.
This followed overnight declines in US equities driven by a tech selloff, geopolitical angst and bets on a smaller Federal Reserve rate cut. US equity futures were little changed. The Treasury curve steepened and oil fell.
The briefing by China’s National Development and Reform Commissioncame before the Golden Week holiday break sent shares in China and Hong Kong surging. Numerous investors from JPMorgan Asset Management to HSBC Global Private Banking questioned the sustainability of that rally.
“While the policy tone is still certainly indicating a supportive tone, the limited new measures appear to be disappointing markets for now,” said Lynn Song, Greater China chief economist at ING Bank NV. “Moving forward, the market trend will likely depend on the speed and strength of further policy follow-up from other ministries.”
The S&P 500 fell 1% on Monday after notching a four-week winning run. In the wake of Friday’s solid jobs data, Treasuries continued to drop — with the 10-year yield topping 4%. The Fed is “well positioned” to pull off a soft landing for the economy, New York Fed president John Williams told the Financial Times in an interview.
“Friday’s strong jobs report not only appeared to kill any chance of a 50-basis-point rate cut in November, it kickstarted chatter about the Fed leaving rates unchanged if economic data continues to come in hotter than expected,” said Chris Larkin at E*Trade from Morgan Stanley. “But as last week showed, geopolitics…
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