TCEHY Tencent Holdings Ltd (PK)

By David Hodari 

Global stocks swung lower Tuesday, amid resurgent fears about the health of China's economy and a slew of geopolitical concerns.

The Stoxx Europe 600 was down 1.4% in early trading, with Germany's DAX index down by 2.1%. This was partly because of a 7% drop in Bayer shares, after a judge reduced the damages the German company must pay in the cancer case related to its Roundup weedkiller, but upheld the jury's finding that it acted with malice.

Technology stocks led the way lower in Europe, with the Stoxx Europe 600's tech sector plunging 3.9%. Austrian semiconductor firm AMS AG plunged 22% after it surprised investors with weak fourth-quarter guidance, while French IT firm Atos plummeted 20% after slashing its forecasts.

The drop in European tech stocks followed heavy selling in Asia-Pacific, where investors reversed the broader market rally that came Friday and Monday amid anxieties about Chinese economic growth. Index heavyweight Tencent Holdings was down 4.6%.

In China, the Shanghai Composite Index and the Shenzhen A Share dropped by 2.3% and 1.9% respectively. Hong Kong's Hang Seng was dragged down 3.1% by sinking financial stocks. Indexes across the rest of the region suffered heavy losses, with the main benchmarks in Japan, South Korea and Taiwan slumping 2% or more.

In the U.S., futures trading put the S&P 500 and the Dow Jones Industrial Average on course for falls of 1.1%, while the tech-heavy Nasdaq Composite Index was set to fall 1.4%. That would extend Monday's weakness for U.S. stocks, which were pulled lower by energy and financial stocks.

Renewed pessimism about global tech stocks came after the U.S. sector ended a run of three consecutive sessions of selling Monday. Investors have turned their backs on riskier sectors such as technology in recent weeks as they have found themselves at the confluence of rising U.S. bond yields, U.S.-China trade tensions and worries about global economic growth.

The yield on 10-year U.S. Treasurys edged lower to 3.153% from 3.196% late Monday. Yields and prices move in opposite directions.

The U-turn in Chinese stocks marked an end to the Shanghai index's sharpest two-day rise since 2015, which came as investors parsed reassuring comments by key government and central bank officials about the health of Chinese economic growth.

The People's Bank of China late Monday moved to support financing for private firms, after the government had attempted in recent months to rein in the country's shadow-banking and credit sectors.

While boosting investor confidence in those private companies "remains critical," the central bank's measures "are far from sufficient to solve [their] broad financing difficulties," Citi economists said in a note.

The central bank's announcement followed the government's publication over the weekend of proposals to cut personal income tax.

Analysts are uncertain as to whether such moves will prevent Chinese growth from decelerating further.

"We're asking whether China is doing stimulus by a thousand cuts but I'm still very skeptical," said Ian Samson, markets research analyst at Fidelity International. "It's more of a sentiment thing and the ongoing slowdown is quite natural but it will continue to weigh on global growth."

The Chinese yuan edged up 0.2% against the dollar, but remained close to 21-month lows.

Investors in U.S. stocks and oil were keeping a close watch on rising geopolitical tensions between the U.S. and Saudi Arabia following the death of Saudi dissident journalist Jamal Khashoggi.

President Trump said late Monday he wanted more information about the death of Mr. Khashoggi but also voiced a protective view of the U.S.-Saudi alliance.

Saudi Energy Minister Khalid al-Falih told Russia's TASS news agency Monday that there was no intention to weaponize oil prices and that production increases would proceed as planned.

The price of Brent crude oil was down 1% at $79.03 a barrel, having slipped 3% over the past week to back below the important $80-a-barrel level.

Market participants were also keeping an eye on the Italian government's budget talks with European lawmakers--the two parties remained on a collision course--and the U.K.'s contentious Brexit negotiations.

Italy's FTSE MIB and London's FTSE 100 outperformed their European counterparts but were still both down by 0.9%, respectively.

In commodities, the price of gold was up 1.1% at $1,235.35 a troy ounce.

Write to David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

October 23, 2018 05:26 ET (09:26 GMT)

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