Stocks Falter as Chinese Economy Feels Trade Pressure
December 14 2018 - 9:25AM
Dow Jones News
By Riva Gold
Concerns over global growth mounted Friday following
disappointing economic data from China and the eurozone, sending
stocks lower on the day and wiping out most of the week's
gains.
The Stoxx Europe 600 was down 0.8% following a 2% fall in
Japan's Nikkei Stock Average and a 1.6% decline in Hong Kong's Hang
Seng Index. Futures pointed to a 0.9% opening drop for the S&P
500 and Dow Jones Industrial Average, with Starbucks and Costco
Wholesale leading declines in premarket trading.
Growing worries about world growth and trade relations have
contributed to steep swings in stock and bonds markets recently,
even as the U.S. economy has been relatively steady.
In the week through Wednesday, investors withdrew record amounts
from global equity funds, although the moves were exacerbated by
funds going ex-dividend, according to EPFR Global.
Friday's losses came as data showed China's economic downturn
deepened last month more than economists expected, as Beijing works
to halt a slowdown while grappling with a trade conflict.
Official figures showed a November slowdown in industrial
production amid issues among auto makers and property markets,
while growth in retail sales dropped to its lowest level in more
than 15 years.
"For a while, the Chinese economy was the extra bit that kept
the global total going," said Alastair Winter, chief economist at
Daniel Stewart & Co. "I do think the Chinese economy is slowing
quite a lot," he added, noting that is one reason Germany's
benchmark DAX index in total return terms is down more than 20%
from its peak in January.
Mao Shengyong, a spokesman for China's National Bureau of
Statistics, said China's economic growth was nonetheless on track
to achieve its annual target in 2018.
Adding to the downbeat tone Friday, purchasing managers' surveys
separately showed that French business activity unexpectedly
contracted for the first time in 2 1/2 years, according to IHS
Markit, while German's composite purchasing managers index reached
its lowest level in four years.
That came a day after the European Central Bank cut its economic
growth forecasts, highlighting the climate of uncertainty around
trade tensions and market volatility.
In European trading Friday, assets closely linked to the Chinese
and global economy, including auto and parts, technology and mining
companies, led declines.
Copper futures were down 0.9% and many global mining companies
followed it lower, given China is the world's largest consumer of
the industrial metal.
Investors in the region were also continuing to parse the latest
Brexit updates after British Prime Minister Theresa May ran into
fresh trouble in Brussels on Thursday with her efforts to persuade
her European Union counterparts to sweeten the Brexit deal.
The British pound and euro each fell 0.8% against the
dollar.
In Asia, technology, health-care and materials companies led
most of the losses on Friday. The Shanghai Composite fell 1.5%
while Shenzhen's All Share index dropped 2.5%, with Chinese
health-care companies tumbling on speculation about potential price
cuts.
The Australian dollar, closely linked to the Chinese economy,
was down 0.9% against the U.S. dollar.
Friday's moves came after world stocks had rebounded earlier
this week as The Wall Street Journal reported that China was set to
introduce an industrial policy that is friendlier to foreign
businesses. President Trump said on Twitter earlier in the week
that "productive" trade talks were under way.
"Markets are behaving as if everything depends on U.S.-China
trade," said Yogi Dewan, chief executive at Hassium Asset
Management.
Many economists expect the trade conflict to continue despite a
90-day tariff truce that Mr. Trump and his Chinese counterpart, Xi
Jinping, reached in early December.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
December 14, 2018 09:10 ET (14:10 GMT)
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