Volkswacht Bodensee - Economic headwinds blow stocks, oil lower

Markets also continued to be undermined by a realisation that interest rates won't be coming down as fast as presumed during the rally late last year.

"A combination of disappointing economic numbers out of China and an uptick in UK inflation for December has seen European markets roll over sharply, as the prospect of early rate cuts continues to get pushed further into 2024," said Michael Hewson, chief market analyst at CMC Markets UK.

China's economy, the world's second biggest after the United States, grew last year at the slowest pace since 1990 save for the pandemic years.

China's National Bureau of Statistics said that gross domestic product expanded 5.2 percent, in line with official targets.

However, the headline numbers hid some worrying developments reported elsewhere, such as a declining population, falling house prices and a drop in retail sales.

Meanwhile, official data showing UK annual inflation inched up to 4.0 percent in December from 3.9 percent the previous month confounded market forecasts of a slight reduction.

It dashed hopes the Bank of England would cut interest rates in the first half of 2024, boosting the pound against the dollar and euro.

Craig Erlam at OANDA said that the rally at the end of last year left markets with little wiggle room in terms of disappointing data.

"Small disappointments can knock market sentiment in a more significant way which could make the rest of (the first quarter) a more turbulent ride than investors would prefer," he said.

The ECB could soon start cutting interest rates, President Christine Lagarde said Wednesday, but likely not before the summer and she stressed that any such move would depend on economic data.

"Enthusiasm about possible near-term rate cuts has been tempered further by European Central Bank President Lagarde, who echoed recent comments by other central bankers, saying rate cuts are likely to begin this summer," said analysts at Briefing.com.

They also pointed to data showing US retail sales rose by 0.6 percent in December, topping estimates.

"The key takeaway from the report is that consumer spending remained healthy in the final month of 2023, which does not strengthen the argument for an imminent start to a rapid rate cut campaign by (the Federal Reserve)," Briefing.com analysts said.

The data helped to push the yield on the 10-year US Treasury note further above four percent.

- Key figures around 1630 GMT -

New York - Dow: DOWN less than 0.1 percent at 37,338.69 points

New York - S&P 500: DOWN 0.5 percent at 4,741.71

New York - Nasdaq: DOWN 0.9 percent at 14,816.13

London - FTSE 100: DOWN 1.5 percent at 7,446.29 (close)

Paris - CAC 40: DOWN 1.1 percent at 7,318.69 (close)

Frankfurt - DAX: DOWN 0.8 percent at 16,431.69 (close)

EURO STOXX 50: DOWN 1.0 percent at 4,403.08 (close)

Tokyo - Nikkei 225: DOWN 0.4 percent at 35,477.75 (close)

Hong Kong - Hang Seng Index: DOWN 3.7 percent at 15,276.90 (close)

Shanghai - Composite: DOWN 2.1 percent at 2,833.62 (close)

Pound/dollar: UP at $1.2666 from $1.2635 on Tuesday

Euro/pound: DOWN at 85.70 pence from 86.07 pence

Euro/dollar: DOWN at $1.0857 from $1.0879

Dollar/yen: UP at 148.43 yen from 147.18 yen

West Texas Intermediate: DOWN 0.5 percent at $72.04 per barrel

Brent North Sea Crude: DOWN 1.0 percent at $77.49 per barrel

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M.Schneider--VB