LONDON (Reuters)

European stocks slipped on Monday (May 16) and Wall Street was set for a lower open, as investor sentiment struggled to recover from last week’s sell off amid fears of a slowdown in economic growth.

Global shares hit their lowest point in 18 months last week, with investors worried that rising interest rates to counter high inflation will damage the global economy.

Unexpectedly weak economic data kept from China kept those worries on centre stage on Monday. April retail sales plunged 11.1 per cent in the year, almost twice the fall forecast, as full or partial COVID-19 lockdowns were imposed in dozens of cities. Industrial output dropped 2.9 per cent when analysts had looked for a slight increase.

At 1104 GMT, the MSCI world equity index, which tracks shares in 50 countries, was up around 0.1 per cent on the day, struggling to recover from last week’s lows.

Europe’s STOXX 600 was down 0.2 per cent while London’s FTSE 100 was down flat.

US stock index futures pointed to a lower open for Wall Street, with Nasdaq futures down 0.4 per cent and S&P 500 futures down 0.3 per cent.

“Inflation’s still relatively high… it’s something that keeps markets relatively unnerved. At the same time there’s more tightening coming from central banks,” said Antoine Lesne, head of ETF strategy and research for EMEA at State Street’s SPDR.

“It’s difficult to find a hedge against falling equities in this context,” Lesne said.

Some investors have been looking to buy the US dollar, gold, or shorter-duration fixed income, he said.

European government bond yields rose, with Germany’s 10-year yield up four basis points at around 0.988 per cent – still below the roughly eight-year high of 1.19 per cent it reached last Monday.

The European Central Bank (ECB) will likely decide at its next meeting to end its stimulus programme in July, and raise interest rates “very soon” after that, ECB policymaker Pablo Hernández de Cos said on Saturday.

“Investors have shown that their focus is increasingly on recession risk,” wrote ING rates strategists in a note to clients.

The economic growth concerns could allow government bonds to function as safe havens, ING said.

“It would take a lot of optimism for 10Y Treasuries and Bund to test 3.0 per cent and 1.0 per cent to the upside in our view,” they said.

At 1137 GMT, the US 10-year yield was at 2.9130 per cent.

The dollar index, which last week surged to a 20-year high of 105.01, was down around 0.1 per cent on the day at 104.41.

The euro was near its lowest since 2017. ECB policymaker Francois Villeroy de Galhau said the euro’s weakness could threaten the central bank’s efforts to steer inflation towards its target.

Sky-high inflation and rising interest rates drove US consumer confidence to sink to an 11-year low in early May and raised the stakes for April retail sales due on Tuesday.

Meanwhile, UK inflation data due on Wednesday is expected to show prices rose 9.1 per cent year-on-year.

Oil prices slipped as investors took profit from a recovery in the previous session.

Brent crude futures were down 1.1 per cent, at $110.29 a barrel at 1121 GMT, while US West Texas Intermediate (WTI) crude CLc1 futures were down one per cent at $109.44 a barrel.

Bitcoin was trading at around US$29,967. Last week it plunged to as low as $25,401.05 – its lowest since December, 2020. Already hurt by declining risk appetite, cryptocurrencies sold off last week when a popular stablecoin, terraUSD, collapsed and lost its dollar peg.