London: Global equity markets were in a sombre mood on Monday, holding well off recent two-year highs after Chinese export data highlighted the damage from the 17-month long trade war and re-focused attention on a crucial December 15 tariff deadline.
Markets had closed last week in an upbeat mood as forecast-beating US jobs data reassured investors about the US economy and sent MSCI’s index of global stocks 0.8 per cent higher but those gains stalled as worries about a Chinese economic slowdown returned.
Wall Street, which closed just 1 per cent off record highs on Friday, was set for a slightly weaker open, futures showed.
Several big events loom for the week — the Federal Reserve meets on Wednesday and new European Central Bank chief Christine Lagarde holds her first policy meeting on Thursday, the same day as Britain’s parliamentary election.
But at the forefront of investors’ minds is the December 15 deadline for the United States to impose a new round of tariffs on China.
Top White House economic adviser Larry Kudlow said on Friday that the deadline was still in place but he also said President Donald Trump likes where trade talks with China are going.
“If we see Donald Trump decide not to delay tariffs, that would lead to a risk-off reaction in markets,” said Nomura currency strategist Jordan Rochester.
“We don’t expect tariffs to go into effect as the talks are ongoing but the trade talks are the main driver this week,” he said, adding he did not expect any “fireworks” from the central bank meetings.
A pan-European equity index inched down 0.1 per cent, having jumped 1 per cent on Friday, as did the German DAX.
France’s CAC 40 — hit last week by fears of US
tariffs on its luxury exports such as wine and handbags — shed 0.3 per cent.
Europe’s energy sector was the biggest loser of the day, falling almost 1 per cent as shares in Tullow Oil slumped 60 per cent to 19-year lows due to issues at its main producing assets in Ghana and the resignation of its chief executive.
Asia, however, managed to notch up small gains, with Japan’s Nikkei adding 0.33 per cent and MSCI’s Asia-Pacific shares outside Japan up 0.15 per cent.
Futures for the US S&P 500, Dow Jones and Nasdaq indexes were all down a marginal 0.1 per cent
Markets have been largely working on the assumption that the Dec. 15 tariffs, covering consumer goods such as cell phones and toys, will be dropped or postponed, given Trump will be unwilling to risk a year-end equity sell-off.
Concerns about damage being done to the global economy by the trade war, were renewed after China released data showing its exports shrank for the fourth consecutive month in November.
Chinese shares closed 0.2 per cent lower, their losses checked by a rise in imports that was interpreted as a sign that Beijing’s stimulus steps are helping to stoke demand.
The US dollar, which bounced on Friday after data showed US job growth increased in November by the most in 10 months, was down marginally against a basket of currencies and the euro, at $1.107.
The strong labour market data in the United States allayed fears about a slowdown in the world’s largest economy which had been fanned by a series of weak figures on business and consumer activity.
“The clouds of recession still remain well offshore despite troubled economies elsewhere in the world and a trade war,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
The biggest currency mover was the British pound which rose to a new 7-month high of $1.3180 as investors raised their bets on a Conservative Party victory — and a majority in parliament — in the general election.
Yields on government bonds inched lower, in keeping with market jitters as investors awaited the central bank meetings.
US 10-year Treasury yields were down 2 basis points at 1.8242 per cent Oil prices weakened after the disappointing Chinese trade data, with Brent futures down more than 1 per cent at $63.73 per barrel after gaining about 3 per cent last week on the news that Opec and its allies would deepen output cuts.