Global Growth Concerns Weigh on Markets Ahead of Central Bank Meetings
September 18, 2023
SYDNEY – Global shares fell and the dollar strengthened on Monday as investors grappled with growth concerns ahead of a week filled with central bank meetings across multiple countries. Central banks in Norway, Sweden, Switzerland, Britain, the United States, and Japan are set to announce their rate decisions.
The pan-European STOXX index slipped 0.5%, driven down by declines in healthcare, banking, and chip stocks. Societe Generale, France’s third-largest listed bank, experienced a more than 6% drop in its shares, marking its biggest one-day fall since March. The bank’s CEO announced that little to no growth is expected in annual sales over the coming years.
In addition to growth concerns, worries surrounding China’s property market, geopolitical tensions, and ongoing strikes have added to global growth worries. China Evergrande Group, a prominent property developer, saw its shares plummet by 25% after police detained some staff at its wealth management unit. Another developer, Country Garden, faced a liquidity test with a deadline to pay $15 million in interest linked to an offshore bond.
Technology shares in the region also retreated, with Taiwan’s TSMC, the world’s top contract chipmaker, falling 3% following reports that it instructed major suppliers to delay the delivery of high-end chipmaking equipment.
Other factors contributing to the uncertainty in markets include the disappearance of China’s defense minister, which has raised questions about President Xi Jinping’s stance towards international engagement. Worker strikes have also disrupted global production, while concerns about a potential U.S. government shutdown have resurfaced.
U.S. futures for the S&P 500 and Nasdaq inched up 0.1%, indicating a cautious sentiment among investors.
James Rossiter, head of global macro strategy at TD Securities in London, noted that bad news stories on the growth side would contribute to a risk-averse feeling in the markets. TD Securities’ models have predicted a slowdown in growth later this year, potentially requiring central banks to ease rates in response.
Global central banks will be in the spotlight this week, with five of the ten most heavily traded currencies overseen by central banks with rate-setting meetings. Additionally, several emerging market central banks are set to convene.
Market expectations suggest that the Federal Reserve will maintain its current range of 5.25% to 5.5% in its rate decision on Wednesday. However, attention will be on the updated economic and rates projections. Meanwhile, the Bank of England is expected to hike rates on Thursday, marking its 15th increase. The Bank of Japan’s policy decision on Friday is another key event that could provide insight into the bank’s plans for its ultra-loose policy.
The dollar remained strong near its six-month top, while the euro saw a slight gain after reaching a 3-1/2 month low. The price of gold rose slightly to $1,924.10 per ounce.
As markets grapple with growth concerns and central bank meetings, investors will closely monitor the decisions and statements from central banks for further clues on the economic outlook and potential shifts in monetary policy.
Reporting by Nell Mackenzie and Stella Qiu; Edited by Shri Navaratnam, Edwina Gibbs, Philippa Fletcher.