Stocks bashed amid China trade war damage

LONDON (Reuters) – Global equity markets were in a somber mood on Monday after Chinese export data highlighted the economic damage from the seventeen month long trade war and refocused attention on a crucial December 15 tariff deadline.

The only big winner of the day was the British pound, which surged to seven-month highs on the dollar ahead of Thursday’s election, which the ruling Conservatives are expected to win comfortably.

World markets had closed last week in an upbeat mood as forecast-beating US jobs data reassured investors about the US economy and sent MSCI’s index of global stocks 0.8% higher. However, those gains stalled as worries about a Chinese economic slowdown returned.

Several big events are due this week: The Federal Reserve meets on Wednesday and new European Central Bank chief Christine Lagarde holds her first policy meeting on Thursday, the same day as Britain’s parliamentary election.

But at the forefront of investors’ minds is the December 15 deadline for the United States to impose a new round of tariffs on China, covering mostly consumer goods such as cellphones and toys.

On Friday, top White House economic adviser Larry Kudlow said that the deadline was still in place, but he also said President Donald Trump likes where trade talks with China are going.

“If we see Donald Trump decide not to delay tariffs, that would lead to a risk-off reaction in markets,” said Nomura currency strategist Jordan Rochester.

“We don’t expect tariffs to go into effect as the talks are ongoing, but the trade talks are the main driver this week,” he said, adding he did not expect any “fireworks” from the central bank meetings.

A pan-European equity index slipped 0.2%, having jumped 1% on Friday, as did the German DAX. France’s CAC 4, which had been hit last week by fears of US. tariffs on its luxury exports such as wine and handbags, shed 0.5%.

Europe’s energy sector was the biggest loser of the day, falling almost 1% as shares in Tullow Oil slumped 60%, hitting 19-year lows due to issues at its main producing assets in Ghana and the resignation of its chief executive.

Asia, however, managed to notch up small gains, with Japan’s Nikkei adding 0.33% and MSCI’s Asia-Pacific shares outside Japan going up 0.15%.