Stocks Falter as Chinese Economy Feels Trade Pressure
14 December 2018 - 11:19PM
Dow Jones News
By Riva Gold
Concerns over the global economy mounted Friday following
disappointing readings from China and the eurozone, sending stocks
lower on the day and wiping out most of the week's gains.
The Stoxx Europe 600 was down 1% following a 2% drop in Japan's
Nikkei and a 1.6% fall in Hong Kong's Hang Seng Index. Futures
pointed to a 0.9% opening drop for the S&P 500 and Dow Jones
Industrial Average, with Starbucks and Costco Wholesale leading
declines in premarket trading.
Growing worries about world growth have contributed to steep
swings in stock and bonds markets this year.
Friday's losses came as data showed China's economic downturn
deepened last month more than economists expected as Beijing works
to halt a slowdown while grappling with a trade conflict.
Official figures showed a November slowdown in industrial
production amid issues among auto makers and property markets,
while growth in retail sales dropped to its lowest level in more
than 15 years.
"For a while, the Chinese economy was the extra bit that kept
the global total going," said Alastair Winter, chief economist at
Daniel Stewart & Co. "I do think the Chinese economy is slowing
quite a lot," he added, noting that is one reason Germany's
benchmark DAX index in total return terms is down more than 20%
from its peak in January.
Mao Shengyong, a spokesman for China's National Bureau of
Statistics, said China's economic growth was nonetheless on track
to achieve its annual target in 2018.
Adding to the downbeat tone Friday, purchasing managers' surveys
separately showed that French business activity unexpectedly
contracted for the first time in 2 1/2 years, according to IHS
Markit, while German surveys also missed expectations.
That came a day after the European Central Bank cut its economic
growth forecasts, highlighting the climate of uncertainty around
trade tensions and market volatility. The European economy, and
particularly its German export engine, are sensitive to changes in
world trade and Chinese demand.
In European trading Friday, assets closely linked to the Chinese
and global economy, including auto and parts, technology and mining
companies, led declines. Copper futures were down 0.9% and many
global mining companies followed it lower, given China is the
world's largest consumer of the industrial metal.
Investors in the region were also continuing to parse the latest
Brexit updates after British Prime Minister Theresa May ran into
fresh trouble in Brussels on Thursday with her efforts to persuade
her European Union counterparts to sweeten the Brexit deal.
The British pound was down 0.5% at $1.2585, while the euro fell
0.5% to $1.1305.
In Asia, technology, health-care and materials companies led
most of the losses on Friday. The Shanghai Composite fell 1.5%
while Shenzhen's All Share index fell 2.5%, with Chinese
health-care companies tumbling on speculation about potential price
cuts.
The Australian dollar, closely linked to the Chinese economy,
was down 0.8% against the U.S. dollar.
Friday's moves came after world stocks had rebounded earlier
this week as The Wall Street Journal reported that China was set to
introduce an industrial policy that is friendlier to foreign
businesses and President Trump said on Twitter earlier in the week
that "productive" trade talks were under way.
"Markets are behaving as if everything depends on U.S.-China
trade," said Yogi Dewan, chief executive at Hassium Asset
Management.
Many economists expect the trade conflict to continue despite a
90-day tariff truce that Mr. Trump and his Chinese counterpart, Xi
Jinping, reached in early December.
--Jessica Fleetham contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
December 14, 2018 07:04 ET (12:04 GMT)
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