- Global shares fell on Friday after US GDP and unemployment data came in weaker than expected.
- Investor concern about Chinese regulatory crackdowns, especially in the tech sector, continued.
- Higher-than-expected inflation readings undermined European markets, despite strong EU growth.
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Global shares fell on Friday after US GDP and unemployment data the previous day reflected slower economic growth than expected, while a looming threat of a Chinese regulatory crackdown on tech stocks continued to weigh on investor confidence.
US futures fell, with Dow Jones futures 0.34% down, S&P 500 futures down 0.7% and Nasdaq futures down by 1.16% at 5:43 am E.T.. The benchmark indices neared record highs on Thursday, leaving the S&P 500 less than 0.1% off an all-time peak.
Weaker-than-expected US economic growth in the second quarter and a slower fall in unemployment that many economist had forecast soured investor optimism over the outlook for recovery, analysts said.
Meanwhile, Amazon's quarterly earnings fell short of expectations, as the e-commerce giant missed quarterly sales estimates for the first time since 2018, while sales and profit forecasts were below expectations, further worrying investors about the economic outlook. The company shares fell as much as 7% in pre-market trading.
Yields on 10-year Treasury notes were last at 1.251%, down by 1.8 basis points ahead of inflation and personal spending data.
Rising Covid-19 cases and Chinese regulatory pressure on tech stocks also weighed on markets. Earlier in the week, Chinese officials had said they would be more considerate of volatility when making regulatory decisions, but the calming words had little lasting impact.
"The fact the tech-heavy Nasdaq futures have led US index futures lower suggests that they, and China, Japan, and South Korean markets are suffering a dose of pre-weekend China regulatory risk jitters," Jeffrey Halley, senior market analyst at OANDA, said.
Asian markets closed lower on Friday, with Tokyo's Nikkei 225 falling 1.8%, the Shanghai Composite declining by 0.42% and Hong Kong's Hang Seng index dropping by 1.28% as a surge in delta variant cases and regulatory concerns dominated sentiment throughout the region.
In Europe, London's FTSE 100 was last down 0.93%, the EuroStoxx 50 had declined by 0.69% and Frankfurt's DAX was last down 0.99%. A measure of eurozone inflation rose more than anticipated in July, coming in at 2.2% compared to an expected 2%. This was its highest since October 2018.
The impact of this could not be set off by a strong read of eurozone GDP, which rose 2% quarter-on-quarter in the the three months to June, breaking two straight quarters of contraction, despite initial difficulties with the vaccination rollout, rising delta variant cases and continuing supply-chain issues.
"Looking ahead at 3Q, we would note that the delta variant is causing some delays in the easing of restrictions and that supply chain problems continue to weigh on manufacturing production. Still, we expect growth to come in very strong – currently pencilled in at 2% quarter-on-quarter – as domestic and foreign demand remain very robust." ING analysts said.
Oil prices fell on Friday, reversing some of the previous day's losses. Slower economic growth and recovery could indicate lower demand for a longer than expected time. Brent crude was last down 0.31% at $74.87 per barrel, while WTI crude was last at $73.36, down 0.35%.