US, European stocks fall as global growth fears weigh

Weak Chinese manufacturing data and a downgrade in eurozone growth forecast caused stock markets in the US and Europe to mostly end in the red on May 3, 2016.
Weak Chinese manufacturing data and a downgrade in eurozone growth forecast caused stock markets in the US and Europe to mostly end in the red on May 3, 2016.PHOTO: AFP

NEW YORK (AFP) - European and US stocks fell sharply on Tuesday (May 3) as weak Chinese manufacturing data and a downgrade in the eurozone growth forecast revived worries about slowing global growth.

Chinese factory activity fell further into contraction territory in April, according to the private Caixin survey of purchasing managers.

That suggests the world's second-largest economy "lacks a solid foundation for recovery and is still in the process of bottoming out", said Caixin Insight Group chief economist He Fan.

The European Union, meanwhile, cut its eurozone growth forecasts for this year, warning that global risks including the slowdown in China and the danger of Britain leaving the bloc were harming economic recovery.

Most bourses were a sea of red.

In New York, the broad-based S&P 500 closed down 0.9 per cent.

London's FTSE 100 index shed 0.9 per cent, while in Paris the CAC 40 retreated 1.6 per cent and in Frankfurt the DAX 30 tumbled 1.9 per cent, falling below the 10,000 points level.

A notable exception was the Shanghai stock index, which climbed 1.9 per cent on speculation the Chinese government would enact new stimulus efforts.

US auto sales bounced back in April, rising 3.6 per cent from the year-ago period and lifting the seasonally adjusted annual rate to 17.42 million in April compared with 16.75 million units a year ago, according to Autodata Corporation.

But stocks were buffeted by oil prices, which retreated further from their 2016 peaks on worries about excess supply.

Adding to the woes: much-lower earnings from Swiss banking giant UBS and Germany's Commerzbank, both of which pointed to the drag from lower interest rates on profits.

Commerzbank's stock dove 9.6 per cent and UBS tumbled 7.5 per cent.

"Concerns about global growth are at the forefront of the investors' thinking right now," said Mr Alan Skrainka, chief investment officer at Cornerstone Wealth Management.

The euro climbed to an eight-month high against the dollar before retreating a bit as expectations dim for the Federal Reserve to soon lift interest rates in light of mediocre US economic data.

Attention is already turning to the release of US jobs data on Friday. Many expect a slowdown in hiring, which would further dim the prospects of the Fed hiking interest rates.