Markets sag on China, Italy, US rate concerns

LONDON: World stock markets slid Monday on economic worries over China and Italy, allied to the prospect of rising US interest rates, dealers said.

Wall Street dipped at the opening bell and was off 0.6 percent two hours into trading, with strong jobs data fanning expectations that the Federal Reserve will hike rates at a quicker pace than previously thought.

In Europe, banks headed the day's losers in a rocky Milan session during which stocks tumbled 2.4 percent on concerns that Italy could face a sovereign debt crisis after its populist government passed a purse-busting budget last week to the chagrin of the EU.

London, Frankfurt and Paris all gave up more than 1.0 percent.

The Tokyo market was shut for a holiday.

A frosty exchange in Beijing over trade tensions between US Secretary of State Mike Pompeo and Chinese counterpart Wang Yi, who indicated a falloff in "mutual trust," only soured global sentiment further.

- 'All-round selloff' -

"It's an all-round selloff: the prospect of high interest rates from the Fed could not come at a worse time, given the slowdown in the Chinese economy and other emerging economies as well as the Italian debt and fiscal crisis," CMC Markets analyst David Madden told AFP as Shanghai skidded to close 3.7 percent down.

The People's Bank of China had lowered the required reserve ratio (RRR) as it looks to shore up the economy after a series of weak data, amid Beijing's trade war with Washington.

"The fact the authorities are cutting the amount of capital banks need to hold in relation to their loan book suggests they are worried about the economy," Madden said.

"It gives off the impression the country is gearing up for a protracted trade spat."

European investors are meanwhile concerned about Italy, which sparked disquiet last week by unveiling a budget that set the public deficit at around 2.4 percent of gross domestic product (GDP) for the next three years, earning a rebuke from Brussels and forcing it to row back slightly.

- 'Bunker of Brussels' -

The European Commission wrote last week to Italian economy minister Giovanni Tria outlining "serious" concerns about the budget, but deputy prime minister Luigi Di Maio responded that the government will "not retreat" on spending plans.

Fellow deputy PM Matteo Salvini ramped up the war of words, attacking EU Commission head Jean-Claude Juncker and EU Economics Commissioner Pierre Moscovici directly.

"Europe's enemies are those cut off in the bunker of Brussels," said Salvini, blasting "the Junckers, the Moscovicis, who brought insecurity and fear to Europe and refuse to leave their armchairs."

Fawad Razaqzada of FOREX.com found that "risk appetite remained largely non-existent at the start of the new week (after) a series of events lately including trade disputes, emerging market currency crises and concerns over interest rate hikes in the US as well as tightening of monetary conditions elsewhere."

- Brazil's Bolsonaro bounce -

Wall Street marked Columbus Day by retreating as the Dow Jones and Nasdaq fell back by 0.6 and 1.1 percent respectively despite news of unemployment at a 49-year low and of rising wages.

Bucking the sagging trend was Brazil, where the Ibovespa index rose six percent on the Sao Paulo exchange after far-right candidate Jair Bolsonaro topped first-round voting in Sunday's presidential election before the gain tapered off to 3.7 percent mid-session.

Oil prices meanwhile dipped after the crown prince of major producer Saudi Arabia said it could access spare capacity to make up for any shortages from Iran when US sanctions are imposed on the country next month.

- Key figures around 1750 GMT -

New York - Dow Jones: DOWN 0.6 percent at 26,282.31

Milan - FTSE MIB: DOWN 2.4 percent at 19,851.0 points (close)

London - FTSE 100: DOWN 1.2 percent at 7,233.33 (close)

Paris - CAC 40: DOWN 1.1 percent at 5,300.25 (close)

Frankfurt - DAX 30: DOWN 1.4 percent at 11,947.16 (close)

EURO STOXX 50: DOWN 1.1 percent at 3,308.83

Hong Kong - Hang Seng: DOWN 1.4 percent at 26,202.57 (close)

Shanghai - Composite: DOWN 3.7 percent at 2,716.51 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at $1.1471 from $1.1524 at 2100 GMT

Pound/dollar: DOWN at $1.3057 from $1.3120

Dollar/yen: DOWN at 113.03 from 113.72 yen

Oil - Brent Crude: DOWN 27 cents at $83.89 per barrel

Oil - West Texas Intermediate: DOWN 44 cents at $73.90