U.S. stock futures slide as sour news on global economy hits sentiment

What’s driving markets

U.S. traders returned from the Labor Day holiday with global markets in a generally risk-off mood after more disappointing news from the world’s second biggest economy.

A Caixin survey showed China’s service sector expanded in August at its slowest pace in eight months, providing further evidence that the country’s post-pandemic recovery is faltering.

Also, a eurozone survey showed output in the bloc contracting at its fastest pace in nearly three years.

Asian and European bourses mostly turned lower, affecting U.S. equity index futures.

“Sentiment has turned downbeat again on China as fresh brushstrokes are painted on the picture of its slowing economy,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The data has overshadowed relief that the struggling property giant Country Garden
2007,
-0.98%
has managed to make key interest payments on its debt, reducing, for now, concerns about contagion in the financial sector. China appears to be taking one step forward, but two steps back, as optimism one day turns to pessimism the next,” Streeter added.

Concerns about economic growth might be expected to support sovereign debt markets, but here too the tone was grim, with Treasury yields rising amid concerns recent increases in oil prices
CL.1,
-0.35%
–though down a bit on Tuesday — may revive inflationary pressures.

“Oil prices have surged to reach new highs in 2023, a development poised to have significant repercussions on the upcoming August consumer price index reports…[which] presents a fresh challenge for central banks as they continue their diligent efforts to bring inflation levels back in line with their desired targets,” said Stephen Innes, managing partner at SPI Asset Management.

“This growing concern has notably impacted sovereign bonds, triggering a sell-off primarily driven by heightened inflation expectations. And, of course, stocks do not like the cut of that new inflation jib,” Innes added.

U.S. economic updates set for release on Tuesday include July factory orders, due at 10 a.m. Eastern.

Companies in focus

Blackstone Inc.
BX,
-1.77%
rose 4% in premarket trade, while shares of Airbnb Inc.
ABNB,
+0.87%
were up 5% after S&P Dow Jones Indices announced that both names would gain inclusion in the S&P 500 index. The changes take effect before the start of trading Sept. 18.