Global equities weaken on dismal economic data, trade row worries

Oil steadies near $64 on hopes of full Saudi output restart

LONDON, Sept 23, (RTRS): Global shares sank on Monday as weaker-than-expected economic data added to investor worries over the unresolved US-China trade dispute’s effects on the world economy.

European stock markets opened lower as surveys of purchasing managers from France, Germany, and the euro zone came in weaker than expected. The pan-European STOXX 600 index was down 0.9%.

The euro fell 0.4% to $1.0966 after the German Purchasing Managers’ Index (PMI) release, its lowest in over a week against the dollar.

Germany’s DAX index hit its lowest level in nearly two weeks, down 1.35% after the eurozone data, while France’s CAC 40 fell nearly 1%.

MSCI’s All Country World Index, which tracks shares across 47 countries was down 0.25%.

US stock futures - earlier up 0.4% fell after the PMI data in Europe. S&P 500 E-mini futures last traded flat.

Most Asian share markets slipped as investors waited for more clarity on USChina trade talks.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%.

Despite the improved tone, markets still remain unconvinced about the possibility of an imminent deal.

Investors were rattled by news on Friday that Chinese officials unexpectedly cancelled a visit to US farms this week following their two days of negotiations in Washington.

Oil fell below $64 a barrel, reversing an earlier gain, pressured by the prospect of a faster-than-expected full restart of Saudi Arabian oil output and by fresh signs of European economic weakness.

Brent crude futures – the international benchmark for oil – fell 0.2% to $63.98 per barrel.

US crude oil futures fell 0.6% to $57.79 a barrel.

US

Wall Street’s main indexes were flat on Monday as mixed economic cues did little to soothe investor concerns over slowing domestic growth in the face of a prolonged US-China trade war.

At 11:31 am ET, the Dow Jones Industrial Average was up 19.89 points, or 0.07%, at 26,954.96, the S&P 500 was up 1.44 points, or 0.05%, at 2,993.51. The Nasdaq Composite was up 0.70 points, or 0.01%, at 8,118.38.

Apple Inc rose 0.5%, boosting the Nasdaq, after US trade regulators approved 10 out of 15 requests for tariff exemptions by the iPhone maker.

Social network Facebook Inc fell 1.6% and was among the biggest drags on the S&P 500.

Boeing edged lower after a Reuters report that European antitrust regulators were set to investigate the plane maker’s $4.75 billion bid for the commercial aircraft arm of Brazil-based Embraer SA.

Additionally, the chief of the US Federal Aviation Administration is set to detail progress on the Boeing 737 MAX aircraft to international air regulators, who are divided about returning the grounded jet to flight after two fatal crashes.

Juniper Networks Inc rose 1.3% as Needham upgraded the network gear maker’s stock to “buy”.

Advancing issues outnumbered decliners by a 1.15-to-1 ratio on the NYSE and for a 1.34-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52week highs and one new low, while the Nasdaq recorded 27 new highs and 34 new lows.

UK

London’s FTSE 100 index slipped on Monday as weak German economic data weighed on banking shares, offsetting a surge in travel operators and airlines after the collapse of the world’s oldest travel firm Thomas Cook.

The FTSE 100 fell 0.3% with financials and mining stocks dragging the most, while the FTSE 250 midcaps index shed 0.6%.

Global miners such as Glencore and Antofagasta also weakened as a lack of clarity in US-China trade talks dented metals prices.

The FTSE 100, whose constituents bring in more than two-thirds of their profits from abroad, saw its steepest monthly fall this year in August when trade tensions between the United States and China escalated.

While the index has benefited from the weakness in the pound for most of 2019 as a painful Brexit process plays out, recent steps by lawmakers in preventing a no-deal Brexit have brought gains for the currency and in turn weighed on exporters.

The FTSE 100 has gained just 8.9% so far in the year, well behind its European counterpart’s 15.4% rise.

The collapse of Thomas Cook spurred buying in tour operator TUI, airlines Ryanair and easyJet and British Airways owner IAG, as investors anticipated the tour operator’s closure would cut capacity in the saturated European holiday market.

The FTSE 350 travel and leisure index rose to its highest level in almost a year.

Marks & Spencer lost 3.2%, on its first day as a mid-cap constituent and after the abrupt departure of its finance chief on Saturday.

Europe

Eurozone stock markets clocked their worst day in one month on Monday after dismal business activity readings from across the currency bloc deepened fears of a looming recession and suggested more stimulus was required.

After logging five straight weeks of gains, euro zone stocks slipped 1% as surveys showed growth in services and manufacturing in the region stalled in September. As a result, bets on rate cuts accelerated in euro zone money markets.

Germany’s DAX index fell 1% to post its biggest one-day fall since Aug 23 as the latest purchasing managers numbers showed its manufacturing sector sinking deeper into recession.

Banks were the worst hit, with the eurozone banking index slumping 2.8. This included a 7.5% slump in Commerzbank after Moody’s said the German bank’s restructuring plan is negative for its credit rating.

The broader pan-European index that includes stocks outside the euro zone slipped 0.8%, breaking three sessions of gains.

Trade-reliant sectors such as mining, auto and parts and technology were among the biggest decliners, losing at least 1.7% each.

Shares of TUI jumped 7.2 to top the STOXX 600 and EasyJet followed on expectations their businesses will benefit from the collapse of British rival Thomas Cook.

Asia

Shares were mostly lower in Asia on Monday as investors kept a wary eye on tensions with Iran and on prospects for a resolution of the tariffs war between China and the US.

The Shanghai Composite index skidded 1.0% to 2,977.00, while Hong Kong’s Hang Seng fell 0.8% to 26,236.64 after yet another weekend of violent protests.

Fosun Tourism Group, the biggest shareholder in Thomas Cook, fell 4.4% in Hong Kong after the 178-year-old British tour company filed for bankruptcy.

Bookings for more than 600,000 global vacationers were canceled Monday as a result. Shanghai-based Fosun International dropped 1.2%.

Britain’s Civil Aviation Authority said Thomas Cook’s four airlines would be grounded and its 21,000 employees in 16 countries, including 9,000 in the UK, will lose their jobs.

In South Korea, the Kospi was flat at 2,091.70, while the S&P ASX 200 in Sydney advanced 0.3% to 6,749.70. Shares fell in Taiwan and in Southeast Asia.

India’s Sensex continued a rally that began Friday with an announcement of fresh tax incentives for businesses. It climbed 3.3% to 39,255.91. Tokyo’s markets were closed for a holiday.

Oil stabilised near $64 a barrel on Monday, after gaining nearly 7% last week, due to prospects of a faster-thanexpected full restoration of Saudi oil output and pressured by fresh signs of European economic weakness.

Oil

Oil fell below $64 a barrel on Monday, reversing an earlier gain, pressured by the prospect of a faster-than-expected full restoration of Saudi oil output and by fresh signs of European economic weakness.

A source, briefed on the latest developments in the Sept 14 attack on Saudi oil facilities, told Reuters Saudi Arabia had restored around 75% of crude production lost.

Oil was up earlier in the session, supported by scepticism over how fast output would come back.

Global benchmark Brent crude fell 44 cents to $63.84 a barrel as of 1212 GMT, having risen as high as $65.50. U.S. West Texas Intermediate was down 38 cents at $57.71.

A survey showing eurozone business growth stalled this month, dragged down by shrinking activity in Germany where a manufacturing recession deepened unexpectedly, also weighed on oil and other markets such as equities.

“Oil prices are tracking European markets lower ... understandably knocked by the woeful manufacturing data from the bloc and the implications for global growth and demand,” said Craig Erlam, analyst at OANDA.

Brent has still gained about 18% this year, helped by a supply-limiting pact led by the Organization of the Petroleum Exporting Countries, although concern about slowing economic growth has limited the advance.

Currencies

The dollar rose against the euro on Monday after dismal manufacturing and services data elevated concerns about the state of the eurozone economy.

Eurozone business growth stalled this month, a survey showed on Monday, dragged down by shrinking activity in powerhouse Germany, where a manufacturing recession deepened unexpectedly.

Monday’s downbeat survey results come less than two weeks after the European Central Bank pledged indefinite stimulus to revive the 19-country currency bloc’s ailing economy.

IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), sank to 50.4 in September from 51.9 in August and was below all forecasts in a Reuters poll that had predicted a reading of 51.9.

“The eurozone flash PMI dashed hope that the worst was past and supports those that were calling for bold ECB action,” Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, LLC, said in a note.

The euro was 0.32% lower against the greenback at $1.0982.

The euro zone economy is not showing any convincing sign of a rebound and a persistent downturn in manufacturing risked infecting the rest of the economy, European Central Bank President Mario Draghi said on Monday.

The dollar has held up well in recent months as investors are attracted to its relatively high yield and the strength of the U.S. economy.

Speculators boosted their net long bets on the US dollar in the latest week to a five-week high, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

The dollar index, which measures the greenback against a basket of currencies, was 0.21% higher at 98.718, its highest since Sept 12.

Sterling slipped 0.43% to trade close to a one-week low as investors looked for signs of progress in Britain’s Brexit talks and awaited a Supreme Court ruling on whether Prime Minister Boris Johnson misled Queen Elizabeth over his reasons for suspending parliament this month.