World shares decline as China’s economic growth slows

World shares declined on Monday after data showed slower-than-anticipated growth in China’s economy last quarter. Remarkably, rising oil prices fed inflation worries.

Additionally, calls by China’s President Xi Jinping on October 15 to make progress on a long-awaited property tax to help lessen wealth gaps also soured the mood.

An MSCI gauge of global stocks fell by 0.1% as declines in Asia and a weak open in Europe erased part of the gains seen last week on a strong start to the earnings season.

Moreover, U.S. stock futures were also down, with S&P 500 e-minis declining 0.2% and Nasdaq e-minis falling 0.3%.

China’s gross domestic product (GDP) increased 4.9% in the third quarter from a year earlier. Notably, that’s the weakest pace since Q3 of 2020. As we know, China is facing power shortages, sporadic coronavirus outbreaks, supply bottlenecks, and debt problems in its property sector.

Oil prices continued a recent rally due to a global energy shortage. U.S. crude hit a seven-year peak, while Brent a three-year high.

Europe’s STOXX 600 equity benchmark index dropped 0.4%, dragged by luxury stocks, which are heavily exposed to China, and some poor earning updates.

Chinese blue chips dropped by 1.2%, while the Shanghai Composite Index fell by 0.1%.

Chinese economy rose slower in Q3 amid policy challenges and high base effects from 2020

According to Iris Pang, an economist at Dutch bank ING, the Chinese economy rose slower in Q3, mainly because of policy challenges and high base effects from 2020.

Pang added that these two factors will likely continue to be in play for Q4, which indicates the slow growth of the Chinese economy will resume.

Shane Oliver, a chief economist at AMP, announced that investors also continued to worry about global inflation, which was largely driven by the reopening of many economies after COVID restrictions and supply chain issues.

On Monday, data revealed New Zealand’s consumer price index (CPI) increased 2.2% in Q3, its biggest increase in over a decade. It led the local dollar to surge 0.5% before changing course.

The U.S. dollar gained 0.1% versus a basket of rivals to 94.04. The pound managed to steady against the dollar after hawkish comments from Bank of England Governor Andrew Bailey over the weekend.

Meanwhile, the Japanese yen traded close to its lowest in almost three years against the greenback.

Moreover, on debt markets, the global repricing of interest rate expectations drove Eurozone bond yields back towards recent multi-month peaks. Germany’s 10-year Bund yields surged 3 basis points at -0.14%.