Global stocks reel from weak Chinese data, Fed uncertainty
Worries over weak China hitting global growth hobbles Wall Street
A gauge of stocks in major markets fell on Tuesday for the first session in 10 after Chinese trade data reinforced views that the world’s second-largest economy continues to lose momentum, while further clouding the market’s view on US interest rates. Crude futures ended lower after early gains.
China’s exports fell less than expected in September but a sharper fall in imports left economists divided over whether the country’s ailing trade sector is showing signs of turning around. The data was not enough to suggest a greater risk of a hard landing, but it did feed expectations that Beijing will soon add to stimulus measures.
St. Louis Federal Reserve President James Bullard, who opposed the decision to delay a rate hike when the Fed met in September, said recent economic data is unlikely to convince other policymakers to increase rates when the Fed meets in two weeks. Fed Governor Daniel Tarullo said the Fed should not hike interest rates this year.
Fed Chair Janet Yellen and Vice Chair Stanley Fischer have recently said they support raising rates this year, but an increasingly vocal group of policymakers warn a global economic chill could weigh heavily on the US economy.
“The biggest market-moving news out is the Fed chitchat, and that’s not really helping,” said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh. “They keep saying something is going to happen and nothing happens.”
The Dow Jones industrial average fell 49.97 points, or 0.29 per cent, to 17,081.89, the S&P 500 lost 13.77 points, or 0.68 per cent, to 2,003.69 and the Nasdaq Composite dropped 42.03 points, or 0.87 per cent, to 4,796.61.
The MSCI world share index fell 0.8 per cent, ending its longest winning streak since February.
The FTSEurofirst 300 index ended down 0.9 per cent and emerging market stocks fell 1.3 per cent. Nikkei futures fell 1.4 per cent.
Fort Pitt’s Forrest said the weakness in stocks toward the market close could be attributed to “a little bit of nervousness out there as the real earnings season begins.”
After the closing bell, JPMorgan started a string of reports from major US banks. Within a week Goldman Sachs, Bank of America, Citigroup, Wells Fargo and Morgan Stanley will post results.
Crude prices lost all their early gains. Brent settled down 1.2 per cent at US$49.24 per barrel after gaining 1.7 per cent at its session high and WTI dropped 0.9 per cent to settle at $46.66 after rising as much as 2.8 per cent. Both fell more than 5 per cent on Monday.
A slowdown in demand growth next year and added supply from Iran if sanctions against Tehran are lifted are likely to keep the oil market oversupplied through 2016, the International Energy Agency said.
Safe-haven US Treasuries prices rose after the Chinese trade data, while continued expectations for a later Fed rate liftoff also supported prices.
“It’s all a global growth fear trade,” said Priya Misra, head of global rates strategy at TD Securities in New York. She said the Chinese data was the main catalyst behind the demand for U.S. government debt.
US 30-year Treasury bonds were last up 29/32 in price to yield 2.8827 per cent, from a yield of 2.928 per cent late on Friday. Benchmark 10-year notes were last up 16/32 to yield 2.0439 per cent, from a yield of 2.099 per cent late on Friday.
The US bond market was closed on Monday.
The dollar’s value against a basket of six major currencies dipped less than 0.1 per cent and earlier touched its lowest in nearly a month.
The euro added 0.2 per cent against the greenback at $1.1381 and the yen also strengthened 0.2 per cent at 119.76 per dollar.