Fears over growth, US-China trade prompt stocks sell-off

Oil falls on shock US stock builds, OPEC supply worries

NEW YORK, May 23, (Agencies): Global stocks sold off while investors raced for the safety of the Japanese yen and some government bonds on Wednesday as concerns rose that setbacks to US-China trade talks would undermine world economic growth.

The Dow Jones Industrial Average fell 107.45 points, or 0.43 percent, to 24,726.96, the S&P 500 lost 8.16 points, or 0.30 percent, to 2,716.28 and the Nasdaq Composite dropped 11.66 points, or 0.16 percent, to 7,366.80.

Trump also floated plans to fine China’s ZTE Corp

and cast doubt on a planned June 12 summit with North Korean leader Kim Jong Un.

Fears over the further dampening of US relations with China and North Korea weighed on equities, and the Federal Reserve’s May meeting minutes due for release on Wednesday were also giving investors pause, analysts said.

Broad risk aversion hurt the dollar against the Japanese yen. The Japanese yen strengthened 0.75 percent at 110.08 per dollar.

But the greenback managed to rise to a six-month high against the euro on data indicating a slowdown in European business activity.

The pan-European FTSEurofirst 300 index lost 1.17 percent and MSCI’s gauge of stocks across the globe shed 0.67 percent.

Another reason for the euro’s woes is Italy, where an incoming coalition government comprised of the two antiestablishment parties — the League and 5-Star — looks likely to implement big-spending policies.

Elsewhere, oil fell after an unexpected build in US crude and gasoline inventories despite strong demand, and as traders weighed the possibility of an increase in OPEC crude output to cover any shortfalls in supply from Iran and Venezuela.

US crude fell 0.98 percent to $71.49 per barrel and Brent was last at $78.89, down 0.85 percent on the day.

US

US stocks fell on Wednesday as President Donald Trump’s latest comments fueled skepticism over US-China trade talks and ahead of a Federal Reserve report that could indicate the pace of future rate hikes.

At 12:33 am EDT the Dow Jones Industrial Average was down 157.63 points, or 0.63 percent, at 24,676.78, the S&P 500 was down 11.64 points, or 0.43 percent, at 2,712.80 and the Nasdaq Composite was down 12.57 points, or 0.17 percent, at 7,365.89.

Seven of the 11 major S&P sectors were in the red, with financial sector leading the declines, down 1.3 percent.

The big banks fell after being outmaneuvered by smaller rivals in the rewriting of the Dodd-Frank law that rolled back some of the restraints imposed following the 2007-2009 global financial crisis.

Industrials, which as a group are the most sensitive to trade issues, fell 0.9 percent.

Retailers had a mixed day. Target sank 5.6 percent after the retailer’s quarterly profit rose less than expected as increasing investments dented margins. The results weighed on Walmart, which fell 0.9 percent.

Tiffany surged 19.6 percent after the jeweler’s quarterly results blew past estimates and the company raised its full-year profit forecast and announced a $1 billion buyback program.

Ralph Lauren soared 16.2 percent after the company’s higher margins helped deliver a solid profit that beat analysts’ estimates.

Lowe’s gained 9.3 percent after the home improvement retailer maintained its annual financial targets and billionaire investor Bill Ackman was reported to have bought a $1 billion stake in company.

Hewlett Packard Enterprise slipped 10.3 percent after the company reiterated expectations of moderating growth.

Comcast dipped 1.7 percent after the US cable operator said it was preparing to top Disney’s offer for certain Twenty-First Century Fox assets.

Disney fell 1.4 percent, while Fox rose 1.8 percent.

Declining issues outnumbered advancers for a 1.31-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.12-to-1 ratio on the Nasdaq.

The S&P index recorded 4 new 52week highs and 1 new lows, while the Nasdaq recorded 58 new highs and 33 new lows.

UK

The UK’s top share index was knocked down of its highs on Wednesday and sustained its biggest loss in two months as oil majors and commodity-related stocks fell but well-received results made Marks & Spencer a bright spot.

The blue chip FTSE 100 index closed down 1.17 percent at 7,785.08 points. A surprise fall in British inflation pushed sterling to its lowest level against the dollar this year but failed to provide any tailwind to companies whose revenues are in foreign currencies.

Energy stocks took around 37 points off the index as shares in Royal Dutch Shell fell 3.3 percent and BP declined 1.9 percent.

Oil benchmarks fell after an unexpected build in US crude and gasoline inventories and as traders weighed the possibility of an increase in OPEC crude output to cover any shortfalls in supply from Iran and Venezuela.

A rise in Brent Crude to $80 per barrel this year has been a big help for both oil majors, with BP still up more than 10 percent and Royal Dutch Shell up 6.8 percent year to date.

There were also big losses among miners such as Anglo American down 5 percent, Rio Tinto down 3.2 percent or Antofagasta down 2.7 percent.

Marks & Spencer shone despite the risk-off mood and was the biggest gainer with a 5.2 percent rise after the retailer gave a full-year update.

Marks & Spencer is undertaking a program of store closures to help revitalize the business.

Ameet Patel, senior analyst for Northern Trust Capital Markets, said M&S’s results were solid and highlighted the confident tone in the company’s outlook commentary.

“There remains a considerable short base in (M&S) for the all the ‘obvious’ reasons to sell UK retail, which brings with it the potential for squeezes on lack of bad news or even shades of positive news,” added Patel.

Shares in Barclays reversed early morning gains and closed down 1 percent after sources told Reuters it had no plans for a tie-up with rival banks.

M&A has been a prominent theme among UK stocks this year as the pound remains at subdued levels, with recent moves being CYBG’s takeover bid for Virgin Money, Takeda’s acquisition of Shire and Sainsbury’s deal with Asda.

Asia

Asian and European markets tumbled Wednesday after Donald Trump cast doubt on a planned summit with North Korean leader Kim Jong Un and appeared to hit out at a deal with China that averted a damaging trade war.

Tokyo ended 1.2 percent down, Hong Kong returned from a one-day break to drop 1.8 percent and Shanghai shed 1.4 percent.

Sydney slipped 0.2 percent, Singapore was one percent off and Wellington lost 0.7 percent.

Taipei, Manila and Bangkok were all sharply down but Seoul was up 0.3 percent, while Jakarta also moved higher.

The European Central Bank will follow suit on Thursday. n Key figures at 0810 GMTTokyo — Nikkei 225: DOWN 1.2 percent at 22,689.74 (close)

Hong Kong — Hang Seng: DOWN 1.8 percent at 30,665.64 (close)

Shanghai — Composite: DOWN 1.4 percent at 3,168.96 (close)

Dollar/yen: DOWN at 110.35 yen from 110.91 yen.

Oil

Oil eased on Wednesday, under pressure from a potential increase in OPEC crude output to cool the market’s recent rally and cover any shortfalls in supply from Iran and Venezuela.

Across the broader financial markets, investors dumped equities and other industrial commodities in favour of the Japanese yen, US and German government bonds and gold, as concern mounted that setbacks to USChina trade talks would undermine increasingly fragile-looking world growth.

Brent crude futures were last down 53 cents at $79.04 a barrel by 1354 GMT, while US crude slipped 24 cents to $71.96 a barrel.

Oil prices have gained nearly 20 percent this year, with Brent briefly rising above $80, driven primarily by coordinated supply cuts by the Organization of the Petroleum Exporting Countries and partners including Russia.

The price has also been affected by rising geopolitical tensions that could dent global output just as demand is set to hit 100 million barrels per day in the final quarter of this year, according to the International Energy Agency.

OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources familiar with the discussions told Reuters.

Gold

Gold prices fell on Wednesday as a stronger dollar outpaced concerns over US-China trade talks, which had earlier boosted the metal’s safe-haven appeal.

The dollar, in which gold and other commodities are priced, rose versus a basket of currencies as investors awaited the release later in the day of minutes from the Federal Reserve’s latest policy meeting.

But the greenback was on the back foot against the euro and the Japanese yen due to the broader risk aversion that had earlier benefited gold.

Spot gold had fallen 0.1 percent to $1,288.98 per ounce by 1400 GMT, after touching its highest since May 15 at $1,297.84. US gold futures for June delivery were down 0.3 percent at $1,288 per ounce.

Prices remained in a narrow range, just below $1,300 per ounce, as investors awaited more clues on the path of US interest rates.

Gold has shown reduced volatility in the last few trading sessions as it attempted a break above $1,300 and prices are “waiting for a new, clear direction,” said ActivTrades chief analyst Carlo Alberto De Casa.