Global equities down as Chinese data shows slowing oil demand

Greenback flat after early gains

NEW YORK, Aug 8, (Agencies): Oil prices fell after Chinese import data showed a slowdown in demand, weighing on world equity markets which fell modestly, even as US technology shares extended recent gains.

China announced retaliatory trade tariffs in response to the United States’ decision to impose 25 percent tariffs on another $16 billion of Chinese goods starting on Aug 23.

Stock markets had recently continued to rise amid sturdy corporate results and data, despite the continuing trade battle between the United States and China, and the US benchmark S&P index closed Tuesday less than half a percent off record highs hit on Jan 26.

The Dow Jones Industrial Average fell 62.04 points, or 0.24 percent, to 25,566.87, the S&P 500 lost 2.33 points, or 0.08 percent, to 2,856.12 and the Nasdaq Composite dropped 4.16 points, or 0.05 percent, to 7,879.51.

MSCI’s gauge of stocks across the globe shed 0.08 percent, while the pan-European FTSEurofirst 300 index lost 0.20 percent.

In the oil market, the US-China trade dispute weighed on prices. US crude fell 3.92 percent to $66.46 per barrel and Brent was last at $71.92, down 3.66 percent on the day.

China’s crude imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a dropoff in demand from the country’s smaller independent, or “teapot,” refineries.

Retaliatory trade tariffs by China briefly boosted the dollar index, which rose as high as 95.417, near a more than one-year peak of 95.652 hit on July 19, before dropping back to near flat on the day.

The index has struggled to break much above the 95.5 level, which it has tested multiple times in the past two months.

The dollar index, tracking it against a basket of major currencies, rose 0.01 percent.

US Treasury yields were changed.

Benchmark 10-year notes last fell 1/32 in price to yield 2.9749 percent, from 2.973 percent late on Tuesday.

US

little

US stocks were slightly lower on Wednesday as a steep fall in crude oil prices hit energy shares, more than offseting gains in technology and bank stocks.

The S&P 500 index slipped after coming within spitting distance of a record high following a four-day rise. It is about half a percent away from the all-time high it hit on Jan. 26.

Dow components Chevron dropped 1.2 percent and Exxon 1 percent.

China’s tit-for-tat response to the Trump administration’s latest round of tariffs dragged down shares of trade-sensitive stocks such as Caterpillar and Boeing. The two companies weighed the most on the Dow Jones index.

The losses, however, were limited due to gains in technology shares, led by Google-parent Alphabet, Facebook and Microsoft.

A strong earnings season has kept up the momentum in the markets and cushioned major blows from trade-related issues.

As the second-quarter earnings season winds down, the estimate for profit growth of S&P companies in the second quarter has risen to 24.1 percent, higher than 20.7 percent at the start of July, according to Thomson Reuters I/B/E/S.

At 12:28 am EDT the Dow Jones Industrial Average was down 61.82 points, or 0.24 percent, at 25,567.09, the S&P 500 was down 2.30 points, or 0.08 percent, at 2,856.15 and the Nasdaq Composite was down 4.03 points, or 0.05 percent, at 7,879.64.

Five of the 11 major S&P sectors were higher, with financial stocks leading the gains.

Shares of Bank of America, JP Morgan and Wells Fargo rose between 0.6 percent and 0.9 percent, lifting the sector.

Tesla shares were down 2.4 percent, following a steep rise a day earlier on Chief Executive Officer Elon Musk’s plan to take the company private.

Walt Disney fell 1.4 percent and was among the biggest decliners on the Dow after its quarterly profit missed estimates.

Mylan fell 3 percent after the drugmaker said it was evaluating a wide range of options and reported a quarterly profit that missed estimates.

Declining issues outnumbered advancers for a 1.33-to-1 ratio on the NYSE and for a 1.16-to-1 ratio on the Nasdaq.

The S&P index recorded 21 new 52-week highs and three new lows, while the Nasdaq recorded 63 new highs and 65 new lows.

Europe

European shares dipped on Wednesday as poor corporate earnings in the pharmaceutical sector weighed on sentiment already soured by trade tensions, with Washington preparing tariffs on another $16 billion of Chinese goods.

The pan-European STOXX 600 ended the session down 0.2 percent, with the European healthcare index leading losers, down 1 percent.

Worries over global trade and tariffs continue to pressure euro zone stocks, with the Euro Stoxx index down 0.6 percent so far in August.

Trading updates from Danish drugmakers Novo Nordisk and Lundbeck disappointed investors and their shares dropped 6 percent and 14 percent respectively.

Britain’s UDG Healthcare also took a hit, down more than 10 percent after flagging weakness at its contract sales and patient support services operations.

Other blue-chip results also weighed, with Dutch food retailer Ahold Delhaize down 1.6 percent.

Italian bank BPER Banca lost nearly 6 percent, with one analyst citing disappointing quarterly interest income.

French supermarket chain Casino shed 6 percent after broker Bernstein cut the stock to “underperform”.

Among better-received trading updates, Nokian Tyres jumped 3.8 percent after beating earnings expectations and Dutch bank ABN Amro added 3.5 percent after reporting second-quarter profits.

Overall, though, the earnings season hasn’t been as strong as in the United States; actual earnings growth for the MSCI EMU index is clocking in at 7.6 percent, according to I/B/E/S data.

Asia

A rally in Asian markets stuttered on Wednesday, with early gains pared as the US-China trade row erodes investor confidence.

Tokyo ended 0.1 percent lower, Shanghai shed 1.3 percent and Singapore was down 0.8 percent, while Wellington was also off.

Hong Kong ended up 0.4 percent, Sydney closed up 0.2 percent and Seoul put on 0.1 percent, with Taipei, Manila and Jakarta also higher.

Key figures at 0810 GMT: Tokyo - Nikkei 225: DOWN 0.1 percent at 22,644.31 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 28,359.14 (close)

Shanghai - Composite: DOWN 1.3 percent at 2,744.07 (close)

Dollar/yen: DOWN at 111.12 yen from 111.37 yen

Oil

Oil prices fell on Wednesday after Chinese import data showed a slowdown in demand and as a trade dispute between Washington and Beijing escalated further.

US crude futures fell more than $1 per barrel to $68.13 after China said it was retaliating against US tariffs by slapping additional import duties of 25 percent on $16 billion worth of US goods, including oil and diesel.

Front-month Brent crude oil futures were down 67 cents at $73.98 a barrel by 1300 GMT.

The trade dispute has rattled global markets on fears it could lead to a slowdown of the world’s largest economies and result in a lower demand for commodities.

China’s crude imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a drop-off in demand from the country’s smaller independent, or “teapot”, refineries.

Gold

Gold prices steadied on Wednesday, but expectations of a higher dollar due to rising US interest rates and strong demand for US Treasury bonds seen as a refuge from trade tensions are expected to weigh.

Spot gold was down 0.1 percent at $1,209.91 an ounce at 1341 GMT compared with $1,204 hit last week, its lowest since March 2017. Prices are down more than 10 percent since April. US gold futures were flat at $1,218.30.

A higher US currency makes dollar-denominated gold more expensive for holders of other currencies, which potentially would subdue demand. This relationship is used by funds to generate buy and sell signals from numerical models.

The US Federal Reserve is expected to increase interest rates twice more this year and three times next year. The next policy meeting is in September.

Higher US interest rates raise the opportunity cost of holding gold, which earns nothing and costs money to store and insure.

On the technical front, first support comes in at $1,200, followed by $1,195, near the low seen in March 2017. Resistance is at the 21-day moving average currently sitting at $1,225.

Lack of investor interest can be seen in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, which at 25,319,951.65 ounces on Tuesday are at their lowest since August 2017.