Stocks roiled by China-US trade tensions; crude resumes its fall

Sterling tumbles on Brexit worries; dollar rebounds

NEW YORK, Dec 10, (Agencies): Stocks around the world are falling Monday morning, and US indexes gave up modest early gains and turned lower, hurt by sharp drops for energy and financial companies.

The British pound is dropping after the UK prime minister postponed a vote on its departure from the European Union, and oil has resumed its sharp slide.

The S&P 500 index lost 47 points, or 1.8 percent, to 2,585, as of 11 am Eastern time. The Dow Jones industrial average fell 435 points, or 1.8 percent, to 23,904, and the Nasdaq composite dropped 73, or 1.1 percent, to 6,894.

US indexes have been lurching up and down since October, mostly down, and the S&P 500 plunged 4.6 percent last week for its biggest loss in more than eight months, as investors felt the US and China are still nowhere close to ending their trade dispute.

Volatility has been high not only week to week but also minute to minute. The S&P 500 zoomed from a gain of 0.2 percent to a loss of 1.8 percent Monday morning.

The pound sank to $1.2517, down from $1.2751 late Friday. The FTSE 100 stock index fell 0.5 percent.

Benchmark US crude fell 98 cents, or 1.8 percent, to $51.66 per barrel in New York. Brent crude, the international standard, lost 40 cents to $61.27 a barrel.

In Europe, Germany’s DAX lost 1.2 percent, and the CAC 40 in France declined 1.1 percent.

Asian stocks were hurt by weak economic data from Japan and China. Revised data showed the Japanese economy shrank by 2.5 percent in the third quarter, a larger decline than analysts expected. Chinese imports and exports climbed at a much slower pace in November than they had in October.

Japan’s benchmark Nikkei 225 slid 2.1 percent, South Korea’s Kospi fell 1.1 percent and Hong Kong’s Hang Seng shed 1.2 percent.

Benchmark US crude fell 78 cents, or 1.5 percent, to $51.863 per barrel in New York. Brent crude, the international standard, lost 54 cents to $61.13 a barrel. It’s a resumption of the steep decline for crude’s price that began in October. Last week, crude steadied after OPEC and other major oil producers said they will reduce production by 1.2 million barrels a day starting from January. The cuts will last for six months.

Energy stocks in the S&P 500 fell 1.7 percent for one the largest losses among the 11 sectors that make up the index.

US

Wall Street stocks were sharply lower in mid-morning trading Monday as the postponement of Britain’s Brexit vote added to the uncertainties that have dragged major indices into correction territory.

Near 1625 GMT, the Dow Jones Industrial Average was down 2.0 percent, or about 485 points, to 23,901.22.

The broad-based S&P 500 dropped 1.8 percent to 2,585.58, while the techrich Nasdaq Composite Index shed 1.3 percent to 6,881.84.

Stocks had a mixed open but shifted downward as word spread that British Prime Minister Theresa May pulled a parliamentary vote for her Brexit plan because of lack of support.

On Monday, Qualcomm said a Chinese court ordered a ban in the country on iPhone sales in a patent dispute between the US chipmaker and Apple. Apple described Qualcomm’s claims as groundless and disputed the characterization of the ruling, saying it continued to sell iPhones in China.

Apple fell 2.1 percent and Qualcomm jumped 2.9 percent.

Some investors thought the ruling might be a “tit-for-tat” response in China to the Huawei arrest or linked to the US-China trade fight.

The court’s decision was reportedly dated November 30, however, which was prior to the arrest.

Art Hogan, chief market strategist at B. Riley FBR, said Brexit added to uncertainty over Europe, along with large street protests in Paris and an ongoing clash between Rome and Brussels over Italian budget plans.

Banks such as Citigroup, JPMorgan Chase and Bank of America all shed more than three percent.

Europe

Simmering tensions between the US and China dented European shares on Monday as investors fled risk at the start of a highly uncertain week with Britain’s parliamentary vote on Brexit looming.

The pan-European STOXX 600 index fell 0.8 percent to hit a two-year low once more by 0830 GMT, with Britain’s FTSE 100 down 0.3 percent. Germany’s DAX, the most sensitive to China due to its big exporters, fell 0.9 percent.

Shares in BASF fell 4.3 percent after the German chemicals firm slashed its forecast for 2018 profits on Friday.

It said the decline was mainly due to its chemicals segment while low water levels on the Rhine and weak automotive demand especially in China were also to blame.

BASF peer Symrise also tumbled 3.6 percent, helping drag the pan-European chemicals sector down 2.3 percent, the worst-performing.

Autos stocks also fell 1.8 percent as trade tensions took their toll.

Chipmakers AMS, Siltronic, STMicro also fell 2.9 to 5.1 percent as investors ditched the tech sector.

Politics drove some of the biggest moves.

French retail, hotel, and transport stocks tumbled anew after a fourth weekend of “yellow vest” protests which are disrupting the economy.

British energy utilities Centrica and SSE both fell around 3 percent as investors held their breath ahead of a crucial vote on Brexit on Tuesday.

Housebuilders Berkeley Group, Persimmon, Taylor Wimpey and Barratt Development fell 1.5 to 2.5 percent as nerves built and Peel Hunt cut its ratings.

Asia

Asian markets sank Monday as investors juggle a number of negative issues that have fuelled worries about the global outlook.

The China-US trade row, the Huawei crisis, signs of weakness in the Chinese and US economies, and Brexit are among the key matters depressing equities, though there was some upbeat news in OPEC’s decision to slash crude production.

Hong Kong shed 1.2 percent, while Shanghai fell 0.8 percent.

Tokyo lost 2.1 percent, with Japanese car giant Nissan dropping 2.9 percent after ousted chairman Carlos Ghosn was charged and faced new allegations for alleged financial misconduct.

Sydney shed 2.3 percent, while Singapore and Seoul each gave up 1.1 percent. There were also losses for Manila, Taipei and Wellington.

Key figures around 0810 GMT Tokyo – Nikkei 225: DOWN 2.1 percent at 21,219.50 (close)

Hong Kong – Hang Seng: DOWN 1.2 percent at 25,752.38 (close)

Shanghai – Composite: DOWN 0.8 percent at 2,584.58 (close)

Dollar/yen: DOWN at 112.64 yen from 112.68 yen

Oil

Oil eased on Monday, echoing the weakness in global stock markets and erasing some of the gains made last week when producer group OPEC and other key exporters agreed to cut their crude output from January to prevent oversupply.

Brent crude oil futures fell 90 cents on the day to $60.77 a barrel by 1510 GMT, while US futures fell $1.06 to $51.55 a barrel.

Prices closed 3 percent higher on Friday after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russia said they would cut oil supply by 1.2 million barrels per day (bpd).

OPEC has agreed to cut by 800,000 bpd, led mainly by Saudi Arabia, while non-members will cut by 400,000 bpd, with most of that decrease shouldered by Russia.

“Friday’s agreement was a seemingly good one, or maybe we should say the best one under the current circumstances,” Tamas Varga, a strategist with PVM Oil Associates, said.

Global equities have fallen by nearly 8 percent so far this year, battered by concern about slowing corporate earnings and the threat to the broader economy from an escalating trade dispute between the United States and China.

A steep increase in the pace of crude supply growth this year, especially in the world’s three largest producers – the United States, Saudi Arabia and Russia – has made a number of analysts wary about the prospect of demand being sufficient to mop up extra oil.

“As usual, prices are not a target of OPEC+ policy, but our takeaway is that current price levels largely meet the interests of most participating countries,” consultant JBC Energy said.

Edward Bell of Emirates NBD bank said “the scale of the cuts ... isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels”.

Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing almost 30 percent in value.

Currencies

The pound slid to its weakest level in nearly 1-1/2 years against the dollar on Monday as British Prime Minister Theresa May postponed a parliamentary vote on her Brexit deal, rekindling doubts about UK’s departure from the European Union in March.

The greenback enjoyed a mild recovery following its steepest weekly drop versus a basket of currencies in three months last week, as traders reduced their expectations that the Federal Reserve might pause its interest rate hikes sooner than previously thought. “It’s definitely weakening the pound,” said Chuck Tomes, associate portfolio manager at Manulife Asset Management in Boston. “It’s casting more uncertainty about a Brexit vote.”

The UK parlimentary vote for May’s Brexit proposal was set for Tuesday. Opponents and supporters of Brexit joined in opposition to her deal. At 10:21 am (1521 GMT), the sterling was down 0.63 percent at $1.2645 after touching $1.2606, which was the lowest since June 2017. The euro hit a three-month peak versus the pound at 90.47 pence. It was last up 0.77 percent at 90.22 pence. The greenback strengthened versus a basket of currencies that includes the euro as traders trimmed their earlier bets on a less aggressive Federal Reserve.

Widening interest rate differentials between the United States and the rest of the world, driven by a confident US Federal Reserve, has fuelled an unlikely dollar rally this year.

However, weak data in recent weeks has clouded the currency’s prospects for next year. “You are getting a bit of reprieve from a very dovish view for the Fed in the next 12 months,” Tomes said. The futures market implied traders expected the US central bank to raise key lending rates by a quarter point at its Dec 18-19 meeting to 2.25-2.50 percent, marking its fourth rate hike in 2018. They now saw no more than one rate increase in 2019, down from two a month ago, according to CME Group’s FedWatch program. An index that tracks the dollar versus a group of six currencies was up 0.31 percent at 96.81 after falling 0.78 percent last week.