Global Stocks Weaken as China's Growth Slows
January 21 2019 - 05:03AM
Dow Jones News
By Georgi Kantchev
Global stocks started the week under pressure after data showed
that China's economy grew at its slowest pace in nearly three
decades last year, the latest sign that the world economy is
decelerating.
The Stoxx Europe 600 fell 0.4% in early morning trade, dragged
down by banks and utility companies. Asian markets finished mostly
higher, though they trimmed gains after the Chinese data
release.
U.S. markets are closed Monday for Martin Luther King Jr. Day.
Futures for the S&P 500 were down 0.4%.
The world's second-largest economy grew 6.6% in 2018, the
slowest annual pace China has recorded since 1990, official data
showed Monday. The economic downturn, which has been sharper than
Beijing expected, deepened in the last months of 2018, with
fourth-quarter growth rising 6.4% from a year earlier.
The Chinese figures come amid a bruising trade fight with the
U.S. and, coupled with lackluster numbers for the American and
European economies, paint a picture of a slowing global
economy.
Worries about growth hit market sentiment late last year, though
stocks recovered some ground early in 2019 due to some progress in
the trade negotiations and reassurances by the Federal Reserve that
it would adjust its pace of tightening monetary policy if the data
worsens.
"The global economy and global trade are clearly slowing and
that is dampening sentiment," said Richard McGuire, head of rates
strategy at Rabobank.
"Investors are trying to get a clearer picture through all the
headline noise out there, whether it's U.S.-China trade or Brexit.
But overall, the uncertainty has a bearing on the market," Mr.
McGuire said.
Later in the week, European Central Bank President Mario Draghi
is expected to acknowledge the darkening outlook in the eurozone
after the bank's policy meeting Thursday. In comments earlier this
month, Mr. Draghi admitted that recent data had been weaker than
expected, although he argued that the eurozone probably would avoid
recession.
Investors were also looking to U.K. Prime Minister Theresa May's
next move on Brexit after lawmakers last week soundly rejected her
plan to exit from the European Union, putting the process in
jeopardy ahead of a March 29 deadline to leave. Mrs. May is
scheduled to detail her "Plan B" for Brexit to parliament on
Monday.
The British pound was volatile, recently trading down 0.2%
against the U.S. dollar.
"The U.K. Government has made no progress at all in unearthing a
solution to its impasse over the agreement to leave the EU. The
pound may well still have more upside on good than downside on bad
news, but there isn't any good news around," Kit Juckes, strategist
at Société Générale, wrote in a note to clients.
Corporate earnings were another focus for investors, with Ford
Motor Co. and International Business Machines fourth-quarter
results on tap later this week.
Slightly more companies than usual have been beating analysts'
earnings estimates so far, providing a source of support for the
market. 76.4% of companies have reported above analyst
expectations, compared with an average beat of 64%, according to
data from Refinitiv. The bar is significantly lower, however, after
steep downgrades to fourth-quarter and 2019 earnings forecasts in
recent weeks.
The WSJ Dollar Index, which tracks the dollar against a basket
of 16 currencies, was broadly stable.
In Asia, Hong Kong's Hang Seng Index rose 0.4% and Japan's
Nikkei finished up 0.3%.
In commodities, Brent crude, the global oil benchmark, was down
0.5% while gold was down 0.4%.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
January 21, 2019 04:48 ET (09:48 GMT)
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