Global jitters keep stocks subdued

Futures signal weak Wall Street, as Asia eyes Chinese fiscal, monetary and regulatory stimulus

World stocks flatlined yesterday, after five straight days of losses, oil prices traded near twomonth lows after fresh signs that global economic growth and company profits may be losing steam. The Dow opened with a 200-point drop, but seemed set to recover.

Hefty US losses the day before have left MSCI’s all-country benchmark near one-year lows, possibly putting it on course for its worst month in six years. The index is now down 12 per cent from record highs hit in January and flat on the day.

European shares however, bounced off near two-year lows, as exporters benefited from weaker currencies, while Asian Growth worries were highlighted by the International Monetary Fund, which recently cut forecasts, citing trade wars and capital flight from emerging markets. The latest European PMI surveys underscored that view, showing German private-sector growth at the slowest in three years.

There are also signs US economic and earnings growth, fuelled partly by tax cuts, may be waning. Wall Street suffered heavy losses on Tuesday after some companies, among them industrial giant Caterpillar, maintained or cut profit forecasts. markets closed flat after Chinese media reported authorities were considering allowing insurance firms to invest in equities.

“We’ve got to accept that in this correction we have had ‘on’ and ‘off’ days’ — a few days back, markets were buoyant on back of an announcement from China on fiscal, monetary and regulatory stimulus, then another day, there are earnings reports that are perceived by investors to be bad,” said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

Factors that have conspired to knock markets this week include disappointing company earnings, a spat between Italy and the European Union over Italy’s budget, criticism of oil power Saudi Arabia over the killing of a dissident journalist and finally, worries that world growth is losing steam.

US shares eventually saw some buying late on Tuesday and closed only half a per cent lower. But futures for all three New York indexes signal more losses.