Global Stocks Weaken Ahead of New Round of U.S.-China Trade Talks
March 20 2019 - 5:37AM
Dow Jones News
By Avantika Chilkoti
Global stocks sagged on Wednesday as investors remained cautious
ahead of another round of high-level trade talks between the U.S.
and China planned for next week.
In Europe, the Stoxx Europe 600 was down 0.3% in morning
trading. Asian stocks led the market lower with Hong Kong's Hang
Seng Index down 0.5% and the Shanghai Stock Exchange down
marginally too.
Futures pointed to a modest opening uptick in the U.S. of 0.1%
for both the Dow Jones Industrial Average and the S&P 500.
On Tuesday it emerged that Trade Representative Robert
Lighthizer and Treasury Secretary Steven Mnuchin planned to fly to
Beijing next week, with Chinese negotiators heading to Washington
after that, in what is being framed as a final push to close a deal
between the world's two largest economies.
Many analysts attributed the rally in equity markets this year
to high hopes for U.S.-China trade negotiations. Sentiment around
the talks had dimmed in recent days as reports suggested major
issues remained on the table.
Many analysts, like Liz Ann Sonders, chief investment strategist
at Charles Schwab, have flagged concerns that any new trade deal
might be "deal light," an agreement that allows the administration
to "take a victory lap" but doesn't tackle issues such as
intellectual property theft.
"The algorithmic trading has been highly correlated to news on
trade, so if you wanted to point to a fundamental driver of this, a
lot of it is hope for a trade deal," said Ms. Sonders, adding that
markets are already pricing in good news from the talks.
The WSJ Dollar Index, which tracks the dollar against a basket
of 16 currencies, was down 0.1% on Wednesday. The 10-year U.S.
Treasury edged down to 2.598%, from 2.614% on Tuesday. Yields move
inversely to prices.
Later Wednesday, the U.S. central bank will release its economic
forecasts, and Chairman Jerome Powell's press conference will be
watched for signals on future monetary policy and the strength of
the U.S. economy.
Global markets have been in flux in recent weeks as investors
digested a slew of conflicting economic data from the U.S.,
including disappointing payroll and inflation figures. Many
analysts are now asking how long the U.S. will continue to grow as
the effects of the Trump administration's generous tax policies
wear off.
"At the same time you saw an administration provide all this
fiscal stimulus, they basically offset it by launching a trade
war," Ms. Sonders said. "So we're in uncharted territory in trying
to gauge the impact it's going to have on earnings, the economy, on
animal spirits and confidence."
Meanwhile, in the U.K. many analysts are expecting the Brexit
deadline to be extended beyond the end of the month as Prime
Minister Theresa May struggles to craft a deal that is palatable to
both Westminster and Brussels.
Analysts at Rabobank called the situation "out of control" and
warned that markets could have become "complacent" about the
chances that the U.K. could come tumbling out of the block without
an agreement, triggering a selloff in the British pound.
"In the coming days faith amongst traders in an ability of U.K.
[members of Parliament] to make rational decisions could fade
rapidly and cause a major selloff," they said in a recent note to
clients.
The pound fell 0.4% against the U.S. dollar on Wednesday to
$1.3218. The FTSE 100 index, which is dominated by large
international businesses, dropped 0.1% while the FTSE 250 was down
only marginally.
Elsewhere in commodities, global benchmark Brent crude oil was
up 0.1% at $67.66 per barrel.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
March 20, 2019 05:22 ET (09:22 GMT)
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