Global Stocks Drop on Political Tensions, Worries Over Chinese Growth
October 23 2018 - 5:41AM
Dow Jones News
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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