Global Stocks Weaken as China's Growth Slows
January 21 2019 - 12:47PM
Dow Jones News
By Georgi Kantchev
Global stocks lost momentum Monday 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 finished down 0.2%, snapping a
four-trading-day winning streak. Asian markets trimmed gains after
the Chinese data release, finishing slightly higher on the day.
U.S. markets are closed Monday for Martin Luther King Jr. Day.
Futures for the S&P 500 were down 0.3%.
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 America and Europe,
paint a picture of a slowing global economy.
On Monday, the International Monetary Fund cut its forecasts for
global economic growth in 2019 to 3.5% from 3.7% in previous
forecasts released in October and from the 3.9% it had expected in
July. The IMF said that "global expansion has weakened," pulled
down by poor performance in Europe and some emerging markets.
Worries about growth hit market sentiment late last year, though
stocks recovered some ground early in 2019 due to 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 in
January, Mr. Draghi said recent data had been weaker than expected,
although he argued that the eurozone probably would avoid
recession.
U.K. Prime Minister Theresa May said Monday she will seek
changes to her Brexit deal but added that negotiations won't be
delayed and that there won't be a second referendum on Britain's
exit from the European Union. Mrs. May's initial plan was soundly
rejected by lawmakers last week, putting the process in jeopardy
ahead of a March 29 deadline to leave.
The British pound wavered, recently trading up 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, said in a note to clients.
Earnings were another focus for investors, with fourth-quarter
results for Ford Motor Co. and International Business Machines on
tap later this week.
Slightly more companies than usual have beaten analysts'
estimates so far this earnings season, providing a source of
support for the market. Around 76% of companies have reported above
analysts' earnings expectations, compared with an average of 64%
beating estimates in data going back to 1994, 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 up 0.1%.
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 12:32 ET (17:32 GMT)
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