Equities falter, dollar climbs on ‘renewed’ growth worries

Oil deepens slide below $58 on recession fears, US supply

NEW YORK, Aug 15, (RTRS): The dollar recovered from early weakness but a gauge of global equity performance edged lower on Thursday as concerns about global growth offset investor optimism over a surge in US retail sales last month and strong Walmart earnings.

Gold prices, which have surged almost 20% since late May on uncertainty driven by the US-Sino trade spat and global growth concerns, edged higher amid concerns about a slowdown after China threatened to retaliate against the latest US tariffs.

China called on the United States to meet it halfway on a potential trade deal as US President Donald Trump said any pact would have to be on America’s terms.

The yield on 30-year US government debt fell to a record low below 2% and benchmark 10-year Treasury notes dropped to a three-year trough, beaten down by the US-Chinese trade tensions and economic growth concerns.

Euro zone government bond yields went further into negative territory, reflecting concerns of an impending global recession after the U.S. yield curve remained inverted for a second day in a row. The inversion is a classic sign of recession.

MSCI’s gauge of stocks across the globe shed 0.28%, while the pan-European STOXX 600 index lost 0.17%.

Stocks on Wall Street trended lower after earlier gains.

The Dow Jones Industrial Average fell 8.38 points, or 0.03%, to 25,471.04. he S&P 500 gained 1.73 points, or 0.06%, to 2,842.33 and the Nasdaq Composite dropped 14.23 points, or 0.18%, to 7,759.71.

The dollar recovered from early weakness against the safe-haven yen on the better-than-expected US retail sales. The yen tends to benefit from geopolitical or financial stress as Japan is the world’s biggest creditor nation.

The Japanese yen weakened 0.22% versus the greenback at 106.16 per dollar. The dollar index rose 0.15%, with the euro down 0.26% to $1.1109.

Oil prices fell more than 1%, extending the previous session’s 3% drop, pressured by mounting recession concerns and a surprise boost in US crude inventories.

International benchmark Brent crude fell $1.50 to $57.98 a barrel. US crude was down 61 cents to $54.62.

US

Stocks around the world remained stuck in the spin cycle Thursday, as worries about a possible recession collided with hopes that the strongest part of the US economy – shoppers spending at stores and online – can keep going.

The S&P 500 moved between modest gains and losses in morning trading after suffering a steep decline a day earlier, when stocks tumbled after a fairly reliable warning signal of recession emerged from the bond market.

In the US, Walmart shares surged 5% and helped to steady the market after it said it made a bigger profit in the last three months than Wall Street expected, thanks in part to strong online sales of groceries. A separate government report also showed that retail sales last month were stronger than economists expected.

The S&P 500 was down 1 point as of 11:13 am Eastern time, after flipping between a loss of 0.2% and a gain of 0.6%. A day earlier, it plunged 2.9%.

The Dow Jones Industrial Average slipped 28 points, or 0.1%, to 25,450, and the Nasdaq composite fell 0.3%.

The worries have pulled the S&P 500 down 4.3% so far this month, while other markets are down even more sharply. The S&P 500, though, remains within 6% of its record set late last month.

Cisco Systems plunged 7.4% for one of the sharpest losses in the S&P 500 after the technology giant gave a profit forecast that fell short of some analysts’ expectations. Technology stocks in the S&P 500 were weak in general, but gains for stocks of companies that sell consumer products, and tend to hold up in times of economic weakness, helped offset them.

Besides Walmart’s surge, Procter & Gamble rose 1.4%, and Coca-Cola gained 1.2%.

UK

London’s FTSE 100 was pushed into the red on Thursday by several heavyweight stocks that traded without dividend entitlement, while gains in gambling firm GVC and trading platform Plus500 helped the mid-cap index outperform.

The FTSE 100 shed 0.3%, as worries of an imminent recession also remained after a steep dive in long-term U.S. and UK government bonds yields. The FTSE 250 added 0.4% by 0736 GMT.

Stocks trading ex-dividend shaved almost 30 points off the FTSE 100, with the likes of Shell, HSBC, Standard Life Aberdeen, Evraz and Phoenix Group all falling.

Both UK indexes had incurred sharp losses in the previous session as investors rushed to sell-off risky assets after 10-year bond yields fell below two-year equivalents for the first time since the financial crisis.

The main index, whose constituents have also been hit by US-China trade worries, hit a more than two-month low on Wednesday and is on course for its worst month in four years. The mid-caps had slipped to their lowest in six months.

“While there may be some bounce as dip buyers test the water, any recovery looks precarious as global risks and macro-economic data show no signs of improving,” markets.com analyst Neil Wilson said. In news-driven moves, online trading platform Plus500 surged 9.2% to a four-month high after its chief executive officer and some other directors bought shares of the company.

“That directors should buy stock has been a key piece of investor feedback and is therefore notably responsive, especially taken with the recent buyback and new distribution policy,” Liberum analysts wrote.

GVC gained 3.7% after the Ladbrokes owner raised its annual core profit forecast after a better-than-expected performance in its UK retail business in the first half of the year.

Shares of blue-chip consumer goods stocks such as BAT and Imperial Brands eked out gains, suggesting that some defensive buying could be at play.

Europe

European stocks tumbled to a sixmonth low on Wednesday, as an inversion in the US yield curve following bleak data out of major economies including Germany and China pointed to a looming recession.

Slumping exports sent Germany’s economy into reverse in the second quarter, while Chinese industrial output growth cooled to a more than 17-year low in July, underscoring the impact of a bruising US-China trade war on global growth.

All sectors were well in the red, with trade-sensitive technology slumping 3%. The Frankfurt-dominated auto index followed with a 2.8% drop, while falling yields took banks to a more than three-year low.

Stalled growth across Europe has been led by a slowdown in the eurozone’s largest economy, Germany, while the fallout from Washington’s trade war with China, Brexit uncertainty, and Italy’s political woes have also plagued the trading bloc.

The pan-regional index has lost more than 5% so far this month, on course to match a 5.7% tumble in May which was its biggest decline in more than three years.

Limiting the index’s losses were gains in some consumer staples, healthcare and utility stocks, as investors turned to defensive plays.

Balfour Beatty topped the STOXX 600, up 9.3% after the British infrastructure company reported higher first-half underlying pretax profit and increased its annual cash forecast.

Asia

Asian stock markets followed Wall Street lower on Thursday after the Dow Jones Industrial Average plunged on mounting fears of a possible recession.

Market benchmarks in Shanghai, Tokyo and Hong Kong all retreated.

The Shanghai Composite Index lost 0.6% to 2,791.60 and Tokyo’s Nikkei 225 sank 1.5% to 20,392.99. Hong Kong’s Hang Seng lost 0.2% to 25,259.68.

Australia’s S&P-ASX 200 fell 2.7% to 6,415.90. Markets in Taiwan, New Zealand and Southeast Asia also retreated.

South Korean markets were closed for a holiday.

Oil

Oil fell 3% to below $58 a barrel on Thursday, extending the previous session’s 3% drop, pressured by mounting recession concerns and a surprise boost in US crude inventories.

In a sign of investor concern that the world’s biggest economy could be heading for recession, weighing on oil demand, the US Treasury bond yield curve inverted on Wednesday for the first time since 2007.

Global benchmark Brent crude fell as much as $1.81, or 3%, to $57.67 a barrel. At 1338 GMT Brent was down $1.20 at $58.28. US crude was down 77 cents to $54.46.

The price of Brent is still up 10 percent this year thanks to supply cuts led by the Organization of the Petroleum Exporting Countries and allies such as Russia, a group known as OPEC+.

In July, OPEC+ agreed to extend oil output cuts until March 2020 to prop up crude. A Saudi official on Aug 8 indicated more steps may be coming, saying “Saudi Arabia is committed to do whatever it takes to keep the market balanced next year.”

But the efforts of OPEC+ have been outweighed by worries about the global economy amid the US-China trade dispute and uncertainty over Brexit, as well as rising US stockpiles of crude and higher output of US shale oil.

“The market is becoming very anxious about global growth,” said Tamas Varga of oil broker PVM.

China reported disappointing data for July, including a surprise drop in industrial output growth to a more than 17-year low. A slump in exports sent Germany’s economy into reverse in the second quarter.

A second week of unexpected rises in US crude inventories is adding to the pressure.

US crude stocks grew by 1.6 million barrels last week, compared with expectations for a drop of 2.8 million barrels, the Energy Information Administration (EIA) said.

Currencies

The dollar recovered from early weakness against the safe-haven yen as better-than-expected US retail sales data on Thursday eased fears that the U.S. economy could be headed for a recession.

The Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation, has strengthened about 0.3% against the dollar this week as investors reached for safety.

The yen started the day strong against the dollar as investors fretted over this week’s economic data from China and Germany that revealed the extent of the damage the China-US trade dispute is causing to the world economy.

The Japanese currency advanced sharply against the greenback on Wednesday after the first inversion in the US Treasury yield curve in 12 years sparked heightened fears of an imminent end to the longest economic expansion in US history.

However, the yen retreated against the greenback on Thursday after data showed US retail sales surged in July, helping assuage financial markets’ fears that the US economy was heading into recession.