Chinese Shares Suffer Worst Day in Five Months as Exports Slump

Date : 03/08/2019 @ 12:55PM
Source : Dow Jones News
Stock : JD com Inc (JD)
Quote : 41.56  0.0 (0.00%) @ 11:54AM
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Chinese Shares Suffer Worst Day in Five Months as Exports Slump

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By Will Horner and Shen Hong 

Global stocks slid Friday, as Chinese shares suffered their worst day since October, after weak export data and comments from the U.S. ambassador to China that a trade deal was not imminent heightened concerns about the world economy.

The Shanghai Composite Index fell 4.4% and its smaller Shenzhen counterpart dropped 3.8%, their biggest single-day drops in five months. Elsewhere in the region, Japan's Nikkei 225 closed 2% lower, while Korea's Kospi lost 1.3%.

U.S. stock futures were lower, putting the S&P 500, Dow Jones Industrial Average and Nasdaq Composite on course for a fifth-consecutive day of declines. S&P 500 and Dow Industrials futures fell 0.4%, while Nasdaq-100 futures slipped 0.6%.

Stocks exposed to China and global trade were likely to fall when Wall Street opens. U.S.-listed Chinese companies and Baidu were 3.2% and 2.3% lower respectively in premarket trading. Nvidia was among a number of semiconductor makers to slip, while and other tech companies including Facebook and Amazon were lower.

Investors will also be scrutinizing nonfarm payrolls figures expected Friday for clues on the health of the world's largest economy.

In February, Chinese exports were down 20.7% from a year earlier, official data Friday showed -- a much steeper decline than economists had expected. Imports tumbled 5.2%, also a bigger drop than expected.

January and February data are typically distorted by weeklong Lunar New Year holidays, according to Shuang Ding, chief economist for greater China and north Asia at Standard Chartered Bank in Hong Kong. However, the weak figures reminded investors of China's bleak macroeconomic picture, he said.

Mr. Ding said the market selloff was triggered partly by that data, as well as the European Central Bank's move and a research note from China's biggest brokerage advising investors to sell shares in People's Insurance Company (Group) of China Ltd., one of the year's top-performing stocks. Mr. Ding said some investors saw this call, which would probably require official approval, as suggesting Beijing wanted to stop the stock market from overheating.

Analysts said another reason investors in China were selling was to lock in gains after the big run-up of recent weeks. Even after Friday's selloff, China's domestic benchmark is up 19% in 2019.

In Europe, the Stoxx Europe 600 dropped 0.8% by afternoon trade, putting it on course for a third consecutive day of declines. Losses were felt most in the index's autos and parts and basic resources sectors, which both fell more than 2%.

Plans by the European Central Bank to deploy additional stimulus helped trigger losses overnight in U.S. and European stocks, since they suggested policy makers had become increasingly concerned about the slowdown across the eurozone.

The ECB said Thursday it would hold interest rates months longer than initially signaled -- at least until the end of 2019 -- and issued a new batch of cheap long-term loans to banks starting in September. The central bank also slashed its forecast for gross domestic product growth for 2019 to 1.1% from 1.7% in December and cut its inflation projections.

Despite the concerned response from markets, some welcomed the actions taken by ECB President Mario Draghi as necessary to guard against a worsening of the global slowdown.

"It seems like Draghi, at least, wanted to be seen as decisive. Now is better to act, sooner, pre-emptive, rather than later," said Geoffrey Yu, head of the U.K. investment office of UBS Wealth Management.

While the ECB's moves showed they were concerned about the slowdown, their actions should be read as vigilance, rather than anxiety, he added. "They are erring on the side of caution."

Jim Reid, an analyst at Deutsche Bank, said in a note that markets interpreted the ECB's stimulus measures as "nowhere near substantial enough," considering the downward revisions of growth forecasts.

Investors in Europe were eyeing poor data from Germany that showed the nation's manufacturing orders plunged 2.6% in January from December, missing economists' forecasts of 0.5%.

Wall Street closed lower Thursday as growth worries and lingering questions over the U.S.-China trade dispute weighed on sentiment. The Dow and S&P 500 both closed down 0.8%.

European investors were taking the cocktail of bad news as a cue to move back into the safety of government bonds, as the yield on German bunds fell to 0.058%. The yield on the U.S. benchmark 10-year Treasury note inched up to 2.638% Friday from 2.637% late Thursday, according to Tradeweb. Yields move inversely to prices.

Oil futures also fell sharply with Brent crude, the global benchmark, down 1.6% at $65.23 a barrel. Gold rose 0.6% to $1,294 an ounce.

Joanne Chiu contributed to this article.

Write to Shen Hong at


(END) Dow Jones Newswires

March 08, 2019 07:40 ET (12:40 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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