World stocks retreat as China-US jitters set in
SINGAPORE – World markets were broadly lower Wednesday on expectations that a trade dispute between China and the United States would simmer and possibly weigh on growth.
Investors are digesting President Donald Trump’s comments that the country was “not ready” for a trade deal with China. Trump spoke to reporters in Tokyo on Monday.
France’s CAC 40 sank 1.8% to 5,218.51 and the DAX in Germany was down 1.3% at 11,870.81. Britain’s FTSE 100 shed 1.3% to 7,173.65.
In Asia, Japan’s benchmark Nikkei 225 gave up 1.2% to 21,003.37.
The Kospi in South Korea retreated 1.3% to 2,023.32 and Hong Kong’s Hang Seng was 0.6% lower at 27,235.71.
Australia’s S&P/ASX 200 eased 0.7% to 6,440.00.
The Shanghai Composite reversed early losses to edge 0.2% higher to 2,914.70. Stocks fell in Taiwan and Singapore, but advanced in Indonesia.
Italy’s FTSE MIB tumbled 1.4% to 19,984.29, after a European Central Bank report sounded the alarm about the country’s debt.
The report released Wednesday contained a chart showing Italy as an outlier among indebted countries, with high financing needs through 2020 and low growth compared to borrowing costs.
Wall Street was positioned for early losses. The future contract for the S&P 500 index fell 0.7% to 2,786.60.
Dow futures were also 0.7% lower, at 25,197.00.
In the previous session, traders who felt jittery about long-term growth shifted their money into bonds, putting pressure on yields.
The yield on the benchmark 10-year Treasury fell to its lowest level since September 2017.
Earlier this month, China and the U.S. concluded their 11th round of trade talks with no agreement. The U.S. has since raised tariffs on Chinese exports, triggering retaliation from China.
The Trump administration has also mounted sanctions on Chinese tech giant Huawei. But it refrained from labeling China or any other country as a currency manipulator in a report to Congress on Tuesday.
“Until markets see encouraging signs of both sides securing a trade deal, this negative sentiment and general risk aversion will most likely continue punishing global equity markets,” Lukman Otunuga of FXTM said in a commentary.
“The negative sentiment isn’t restricted to pessimism in equity markets, with a number of other risk assets also tracking losses,” he added.
Jingyi Pan of IG said that China’s official PMI for May, which will be released on Friday, would give an indication of the initial impact of tariffs on growth.
ENERGY: Benchmark U.S. crude lost 94 cents to $58.20 per barrel. The contract rose 51 cents to $59.14 per barrel on Tuesday. Brent crude, the international standard, fell $1.11 to $67.56 per barrel. It settled 10 cents lower at $68.67 per barrel in the previous session.
CURRENCIES: The dollar weakened to 109.26 yen from 109.36 late Tuesday. The euro dipped to $1.1153 from $1.1161. /gg
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