Weak Chinese trade, US rate hike fears sink global stocks
A Chinese investor eats lunch as she monitors stock prices at a brokerage house in Beijing, AP File Photo
NEW YORK, United States—Another contraction in Chinese trade and rising expectations of a US interest rate hike in December sent most global markets tumbling Monday.
China’s 18.8 percent fall in imports from a year ago, and a 6.9 percent drop in exports, spelled more sluggishness in the world’s second-largest economy and in global growth more generally, hitting commodity prices as well as the shares of companies like Caterpillar which depend on them.
Supporting that view, the Organisation for Economic Co-operation and Development on Monday cut its forecast for global growth to 2.9 percent this year and 3.3 percent in 2016, calling the stagnation in global trade “deeply concerning.”
On top of that was the strong US jobs data on Friday that gave more support for the US Federal Reserve hiking interest rates for the first time in nine years, which would raise the borrowing costs of governments and companies around the world.
Wall Street’s key indices all tumbled 1.0 percent with little to spur buying after six straight weekly gains.
Mace Blicksilver of Marblehead Asset Management said US investors have a number of concerns, and that the market was “probably stronger than it should have been” last week.
“A little weak China data didn’t help,” he added.
European markets fell as brokers pondered the impact of higher US rates and slower global growth. London’s FTSE dipped 0.9 percent, Frankfurt’s DAX 30 lost 1.6 percent and Paris’ CAC 40 dropped 1.5 percent.
Friday’s strong US jobs report “pretty much made it a given that a US rate hike will take place after all in 2015,” said Markus Huber, senior analyst at broker Peregrine & Black.
Ironically Chinese shares pushed higher, buoyed by news that the government was lifting a four-month ban on IPOs.
Chen Jiahe of Cinda Securities said regulators were more comfortable “after leveraged funding through outside channels was cleared and investor confidence recovered.”
The dollar stabilized after last week’s surge on the rate expectations, trading at 123.18 yen and $1.0749 per euro in late deals.
Still, said Joe Manimbo of Western Union Business Solutions, “market focus on monetary policies that are expected to loosen in Europe and tighten in the US suggests more open road for the dollar to run over the foreseeable future.”
The key figures around 2200 GMT
New York – Dow: DOWN 1.0 percent at 17,730.48 (close)
New York – S&P 500: DOWN 1.0 percent at 2,078.58 (close)
New York – Nasdaq Composite: DOWN 1.0 percent at 5,095.30 (close)
London – FTSE 100: DOWN 0.9 percent at 6,295.16 (close)
Frankfurt – DAX 30: DOWN 1.6 percent at 10,993.241 (close)
Paris- CAC 40: DOWN 1.5 percent at 4,911.17 (close)
EURO STOXX 50: DOWN 1.4 percent at 3,418.36 (close)
Tokyo – Nikkei 225: UP 2.0 percent at 19,642.74 (close)
Euro/dollar: UP to $1.0748 from $1.0742 late Friday
Dollar/yen: UP to 123.19 yen from 123.16 yen late Friday
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