Global stocks slide further as growth worries escalate
TOKYO (Reuters) — Losses in global stock markets snowballed yesterday, with US equity futures and Asian shares sliding on worries over slowing growth and fears that a rise in tensions between Washington and Beijing could torpedo chances of a trade deal.
Spreadbetters expected European stocks to follow, with Britain’s FTSE .FTSE seen dropping 0.7 percent, Germany’s 1.1 percent and France’s one percent.
Traders returned from the weekend to face a growing wall of worry, with the world’s largest economies — the United States, China and Japan — all reporting weaker-thanexpected data which pointed to moderating activity.
Investors were also bracing for a Tuesday vote on British Prime Minister Theresa May’s European Union divorce deal, which looks set to be rejected by parliament, raising fears of a chaotic exit in March.
S&P futures and Dow futures both fell 0.7 percent, suggesting more pressure on Wall Street later in the session as investors continue to dump riskier assets.
MSCI’s broadest index of AsiaPacific shares outside Japan slid 1.5 percent to a near three-week low.
The Shanghai Composite Index retreated 0.6 percent. Australian stocks lost 2.2 percent, brushing the lowest level since December 2016, and South Korea fell one percent.
Japan’s Nikkei shed 2.1 percent. Data early in the session showed the economy contracted the most in over four years in the third quarter as companies cut capital spending amid uncertainty over global demand and trade tensions.
US-China trade negotiations need to reach a successful end by March 1 or Washington will impose new tariffs, US Trade Representative Robert Lighthizer said on Sunday, clarifying that there is a “hard deadline” after a week of seeming confusion among President Donald Trump and his advisers.
Markets were already reeling from news last week that Canadian officials had arrested the chief financial officer of Chinese smartphone maker Huawei for extradition to the United States. The arrest could throw up another hurdle to the resolution of a trade war between the world’s top two economies.
Wall Street’s main indexes fell more than two percent on Friday in a broad sell-off, posting their largest weekly percentage drops since March.
“The biggest concerns for equity markets currently is the US-China trade conflict and the Huawei incident,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.
“The trade theme will preoccupy the markets through the 90-day truce period between the United States and China, waiting for any signs of concession between the parties.”
Trump and Chinese President Xi Jinping early this month agreed to a temporary truce that delayed a planned Jan. 1. US tariff hike while the two sides negotiate.
“Eventually, because it is in both party’s interests, I think some deal will be struck but the process, I suspect, will have many hills and valleys that will impact the markets,” said Mark Grant, chief global strategist at B. Riley FBR Inc. in Florida.