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Global shares slip to one-month low after U.S. manufacturing shock – Reuters

October 2, 2019 by Zettan

LONDON (Reuters) – A major global share index hit its lowest level in a month on Wednesday after U.S. manufacturing activity tumbled to more than a decade low, sparking worries that the fallout from the U.S.-China trade war is spreading to the U.S. economy.

The dollar steadied, having earlier been knocked off its highest levels in more than two years following the data. The index that measures the greenback against a basket of peers was up 0.16%.

A slowdown in U.S. economic growth would remove one of the few remaining bright spots in the global economy and come just as Europe is seen as close to falling into recession.

MSCI’s gauge of stocks across the globe, covering 49 markets, dipped 0.3% to its lowest since Sept. 5, after shedding 0.83% in the previous session.

European shares opened lower, with London stocks lagging the most on fresh Brexit drama. The pan-European STOXX 600 index was down almost 1 percent.

The FTSE 100 index .FTSE slipped 1.5%, the largest drop across European regions and ahead of UK Prime Minister Boris Johnson’s talks with Brussels as he prepares to announce his final Brexit offer.

The pound was down 0.6% at $1.2238. GBP=D3

Adding to investor anxieties, European companies looked set for their worst quarterly earnings in three years as revenue drops for the first time since early 2018, according to the latest Refinitiv data.

In Asia, MSCI’s ex-Japan Asia-Pacific shares index dropped 0.8%, with Australian shares falling 1.5% and South Korean shares shedding 1.95%. Japan’s Nikkei .N225 slid 0.5%. China markets are closed for a one-week holiday.

“Our base case is that trade tensions will remain elevated, and we expect global growth to slow in 2020 to its slowest pace since the global financial crisis,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“We don’t rule out a worsening of the trade situation over the next six to 12 months.”

Hong Kong’s Hang Seng index .HSI was down 0.3% after a market holiday the previous day. The index fell as much as 1.2% in early trade. On Tuesday, Hong Kong police shot a teenage protester, the first to be hit by live ammunition in almost four months of unrest in the Chinese-ruled city.

Adding to tensions in Asia, North Korea carried out at least one more projectile launch on Wednesday, a day after it announced it will hold working-level talks with the United States at the weekend.

On Wall Street on Tuesday, the S&P 500 .SPX lost 1.23% to hit four-week lows. Selling was triggered after the Institute for Supply Management’s (ISM) index of factory activity, one of the most closely watched data on U.S. manufacturing, dropped to the lowest level since June 2009.

Markets had been expecting the index to rise back above the 50.0 mark denoting growth.

“Historically, equity returns are worst when the ISM manufacturing drops from levels below the 50 threshold,” Patrik Lang, head of equity research at Julius Baer.

“Uncertainty around the US-China trade war is obviously the main reason for the weakness, with companies exposed to global trade increasingly putting off investment decisions.”

(GRAPHIC: U.S. manufacturing – here)

The data came after euro zone manufacturing data showed the sharpest contraction in almost seven years.

The poor data lifted the Fed funds rate futures price sharply, with the November contract now pricing in about an 80% chance the U.S. Federal Reserve will cut interest rates on Oct. 30, compared to just over 50% before the data.

U.S. President Donald Trump once again lashed out at the Federal Reserve on Tuesday, saying the central bank has kept interest rates “too high” and that a strong dollar is hurting U.S. factories.

It is another question, however, whether the Fed will cut interest rates as hastily as Trump, and financial markets, want.

Just on Tuesday, Chicago Fed President Charles Evans said the Fed can keep rates steady for now.

Elsewhere in currencies, the yen rose to 107.71 yen per dollar JPY=, from Tuesday’s low of 108.47.

The euro fell 0.15% to $1.0915 EUR=.

The Australian dollar fetched $0.6693 AUD=D4, having hit a 10-1/2-year low of $0.6672 the previous day after the Reserve Bank of Australia cut interest rates and expressed concern about job growth.

Euro zone bond yields inched up after another speech from outgoing ECB chief Mario Draghi calling for fiscal stimulus to boost the region’s sluggish economy.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 1, 2019. REUTERS/Staff/File Photo

Gold rose to $1,479.13 per ounce from a two-month low of $1,459.50 hit on Tuesday on the back of a robust U.S. dollar.

The weak U.S. data pushed oil prices to near one-month lows, although a surprise drop in U.S. crude inventories helped them to rebound.

Brent crude futures rose 0.2% to $59.01 a barrel, after hitting a four-week low of $58.41 on Tuesday, while U.S. West Texas Intermediate (WTI) crude gained 0.69% to $53.99 per barrel after hitting a one-month low of $53.05.

Reporting by Ritvik Carvalho; additional reporting by Hideyuki Sano; Editing by Hugh Lawson

Asian shares, dollar brace for China GDP – Reuters

July 15, 2019 by Zettan

SYDNEY (Reuters) – Asian shares advanced on Monday as investors breathed a sigh of relief after encouraging Chinese data suggested the world’s second-biggest economy may be starting to stabilize thanks to ramped-up stimulus from Beijing.

FILE PHOTO: Investors look at screens showing stock information at a brokerage house in Shanghai, China May 6, 2019. REUTERS/Aly Song

The positive mood appeared likely to spread, with early European trades showing the pan-region Euro Stoxx 50 futures up 0.1%. Futures for Germany’s DAX and France’s CAC 40 rose 0.1% each while FTSE futures were flat. E-minis for the S&P500 added 0.1%.

Second quarter economic growth slowed to 6.2% from a year earlier, the weakest pace in at least 27 years while separate data showed the country’s industrial output and retail sales handily topped forecasts.

The promising monthly activity data suggested a flurry of stimulus measures from China have been able to prop-up domestic growth and offset some of the damage from a protracted trade war with the United States, analysts said.

Equity markets were choppy in the wake of the Chinese data as some expected Beijing might temper further stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan reversed earlier losses to be 0.2% higher. It fell a little more than 1% last week, ending five straight weeks of gains.

Trading was light on Monday as Japan was shut for a public holiday.

Chinese shares were down before Monday’s data release, after which they pared losses and then produced gains for the day. The blue-chip index gained 0.4% for the day. Hong Kong’s Hang Seng index was up 0.2%.

Australian shares lost 0.7% while South Korea’s KOSPI slipped 0.2%.

“Investors may be scaling back easing expectation upon today’s data as fiscal measures appear to be working,” said Westpac analyst Frances Cheung.

“That said, we believe the PBoC will still be supportive of liquidity. Expect yields to be stable and any temporary bearishness to be expressed via swaps.”

Later in the week, U.S. retail sales and industrial production data will provide clues about the health of the world’s largest economy. The U.S. Federal Reserve will release its ‘Beige Book’ on Wednesday, which investors will scour for comments on how trade tensions were affecting the business outlook.

In currency markets, the Australian dollar, often played as a liquid proxy for the Chinese yuan, jumped after the data to a high of $0.7033, a level not seen since July 4. It was last up 0.2% at $0.7030.

The greenback was barely changed at 96.841 against a basket of major currencies. The dollar index fell for three days in a row as markets fully priced in the chance of a 25-basis-point (bps) cut to U.S. interest rates. There is also a small probability of a 50 bps cut.

Against the Japanese yen, the dollar ticked up from near the lowest since early June at 108.01 while the single currency paused at $1.1272 after three successive sessions of gains.

Expectations that the Fed will keep rates supportive have sent bonds rallying with yields on ten-year U.S. Treasuries now below the current Fed rate range of 2.25%-2.50%. <0#FF:>

“Dovish Fed rhetoric has rendered a July rate cut, in the market’s eyes, as a fait accompli: it’s not if they cut but by how much,” Morgan Stanley strategist Hans Redekar told clients in a note.

Redekar said the bank was re-entering its short dollar/long yen position.

“If markets are disappointed, the yield curve would likely flatten, the USD strengthen, and financial conditions tighten. These forces would exacerbate the already considerable headwinds facing the global economy,” he added.

“Global reflation requires a weaker USD to bolster global trade and commodity prices.”

Worries about world growth, low inflation and ongoing Sino-U.S. trade tensions have meant investors are piling money onto bonds and money market funds, Jefferies said, citing its global asset fund flows tracker.

“The danger is that with a mountain of cash parked in money market funds any trade ceasefire would cause a huge shift away from safe assets,” said Sean Darby, Jefferies’ global equity strategist.

“Presently, investors don’t seem to be in any particular rush to buy equities – earnings revisions have yet to bottom out while economic surprises have been rare,” he added.

“The bottom line is that we would issue a pause on the risk rally.”

In commodities, U.S. crude fell 21 cents to $60 a barrel. Brent crude was off 10 cents at $66.62.

Gold slipped to 1,414.25 an ounce, drifting away from a recent six-year top of $1,438.60.

Editing by Shri Navaratnam and Richard Borsuk

US shares hit record and gold drops as trade talk hopes rise – BBC News

July 2, 2019 by Zettan

The S&P 500 index of US stocks has closed at a record high amid signs of progress in US-China trade talks.

The index closed at 2,964.33, beating 21 June’s previous high, with technology stocks driving the rise.

Market watchers say more optimism around a potential trade deal between the US and China led to the movement.

And gold, often seen as a safe asset in times of uncertainty, fell 2% to $1,382 per ounce, the biggest drop since June 2018.

The Dow Jones closed 0.44% higher at 26,717.43, while the Nasdaq finished 1.1% higher at 8,091.16.

In Europe, both the UK’s FTSE 100 index and Germany’s Dax closed 1% higher.

“We’re right back on track,” US President Donald Trump said after the countries agreed to restart trade talks.

“Gold tends to do well during times of concern over growth, market volatility or when markets think the powers-that-be are losing control of events,” said Russ Mould, investment director at stockbroker AJ Bell.

“A trade deal would deal with all three issues and markets are happy to take the view that a deal is coming. Though it could still be a long time coming, if there is to be one at all.”

Trade row

Negotiations between China and the US have dominated market moves for months as positive statements are often followed by extra tariffs, sending stock, currency and commodity markets up and down.

The latest moves follow a pledge to renew talks between the US and China, an agreement that was reached at the G20 summit in Japan.

US President Donald Trump agreed to hold off on $300bn of new tariffs on goods and relaxed restrictions on Huawei, while China agreed to make new purchases of US farm equipment.

Last year, the US imposed three rounds of tariffs on more than $250bn worth of Chinese goods. China hit back by imposing tariffs ranging from 5% to 25% on $110bn of US products.

A truce agreed last December collapsed and in May the US raised tariffs on $200bn of Chinese products to 25% from 10%. Again China retaliated with tariff on $60bn of US goods.

‘Strong run’

The price of gold is also retreating after gaining 8% in June, with prices exceeding $1,400 per troy ounce.

“Gold has just had a strong run. Nothing goes up in a straight line,” said Mr Mould.

While it earns no income, like a share or a bond would, gold’s indestructible nature and its place in history as a store of value make it attractive to some investors in times of strife.

Other safe-haven assets also declined, including the Japanese yen and the Swiss franc. The dollar rose 0.4% against the yen to 108.26, and advanced 0.7% on the franc to 0.9830 francs.