Shares fall after news of a decline in US production
The main global stock index hit its lowest level in a month on Wednesday after US manufacturing activity fell to more than a decade, raising fears that the effects of the American trade war are spreading to the US economy..
The dollar has stabilized, falling from the highest levels in the past two years. Dollar Index Gains 0.16% Against A Basket Of Currencies.
A slowdown in US economic growth could neutralize one of the few remaining bright spots in the global economy, as in Europe, which is approaching a recession.
MSCI Global Stock Index, covering 49 markets, fell 0.3% to its lowest level since September 5 after falling 0.83% in the previous session.
The European market opened lower, with UK stocks lagging the most due to Brexit. The pan-European index STOXX 600 fell by almost 1%.
The FTSE 100 Index is down 1.5%, the largest drop in European regions ahead of British Prime Minister Boris Johnson’s talks with Brussels as he prepares to announce his final Brexit proposal.
The pound fell 0.6% to $ 1.2238.
In addition to investor worries, European companies appear set to have their worst quarterly earnings in three years as revenues fall for the first time since early 2018, according to the latest data from Refinitiv..
In Asia, the MSCI stock index for the former Japan in the Asia-Pacific region fell 0.8%, Australian stocks fell 1.5% and South Korean stocks lost 1.95%. Japanese Nikkei .N225 fell 0.5%. Markets in China are closed for a week off.
«Our baseline scenario is that trade tensions remain elevated and we expect global growth to slow in 2020 to the slowest pace since the global financial crisis.», – said Mark Hefele, Investment Director of UBS Global Wealth Management.
«We do not rule out the deterioration of the trading situation over the next six to twelve months.», – he added.
The Hong Kong Hang Seng Index fell 0.3% after the weekend. The index fell 1.2% in early trading. On Tuesday, Hong Kong police shot and killed a protester teenager who was the first to be killed with live ammunition in nearly four months of unrest in the Chinese-ruled city..
In addition to tensions in Asia, North Korea carried out at least one more missile launch on Wednesday, a day after announcing that it would hold working-level talks with the United States over the weekend..
On Wall Street on Tuesday S&The P 500 shed 1.23% to hit four-week lows. Sales began after the Institute for Supply Management (ISM) Manufacturing Activity Index, one of the most closely tracked manufacturing data in the United States, fell to its lowest level since June 2009..
Markets were expecting the index to rise above 50.0 again, indicating growth.
«Historically, stock returns are at their worst when ISM production drops from levels below 50, says Patrick Lang, head of stock research at Julius Baer. Uncertainty around the U.S.-China trade war is clearly the root cause of the weakness, as companies exposed to global trade increasingly postpone investment decisions».
Weak data have pushed up the Fed rate futures price sharply, as the November contract for the US Federal Reserve to cut interest rates on Oct.30 is now estimated to be about 80% likely, up from just over 50% before the data was released..
US President Donald Trump attacked the Federal Reserve again on Tuesday, saying the central bank has kept interest rates «too high» and that a strong dollar is damaging American factories.
Another question, however, is whether the Fed will cut interest rates as quickly as Trump and financial markets want..
Just on Tuesday, Chicago Fed President Charles Evans said that the Fed can still maintain stable rates.
Yen Rises To 107.71 Yen Per Dollar From Tuesday Low 108.47.
Euro fell 0.15% to 1.0915 euro against the dollar.
Aussie gained $ 0.6693, hitting a 10.5-year low of $ 0.6672 yesterday, after the Reserve Bank of Australia cut interest rates and expressed concern about job growth.
Eurozone bond yields rise after another speech by former ECB chief Mario Draghi calling for tax incentives to stimulate the region’s sluggish economy.
Gold rises to $ 1,479.13 an ounce from a two-month low of $ 1,459.50 hit Tuesday amid a strong US dollar.
Weak US data pushed oil prices to monthly lows, although unexpected drop in US oil inventories helped them recover.
Brent crude futures rose 0.2% to $ 59.01 a barrel after hitting a four-week low of $ 58.41 on Tuesday, while West West Intermediate (WTI) crude rose 0.69% to hit 53 $ 99 a barrel, after hitting a monthly low of $ 53.05.