Global stocks sank on Wednesday against the continuing trade tensions and disappointing economic data in Europe. All this, coupled with tensions over budgetary rules between Italy and the European Union hurt investors’ appetite for risk.
German unemployment unexpectedly rose, while French inflation sharply slowed down, pitting at risks the European economic growth.
The traders are taking a more cautious approach to risk assets, with the trade battle between Washington and Beijing proving to be the main point of anxiety for global markets.
President Donald Trump said earlier this week that his administration was “not ready” to make a deal with China, adding tariffs on the country’s imports could go up “substantially”. Meanwhile, a Chinese official hinted Tuesday that Beijing could use its strength in rare earth minerals as leverage in its trade dispute with the US.
Asian markets recap
Most of the stock indexes of the Asia-Pacific region ended today’s trading session with declines with only the Chinese mainland benchmark Shanghai Composite being into the green.
In Japan, the blue-chip index Nikkei 225 fell by 256.77 points, or 1.21%, closing at 21,003.37 points. Earlier today, the Japanese media reported that Toyota Motor Automobile Concern is considering investing about 500 million EUR in China’s largest mobility service – Didi Chuxing. In addition, Toyota plans to set up a mobile phone company in China. The stocks of Toyota Motor rose by 0.72% and Mitsubishi Motors added 2.52%. The shares of the industrial conglomerate Sony Corp rose by 0.39%.
In China, the mainland index The Shanghai Composite advanced by 0.16% to 2,914.70 points. Meanwhile, the Hong Kong’s benchmark Hang Seng fell by 120.19 points, or 0.44%, to 27,270.62 points.
Earlier today, the Chinese Communist Party’s newspaper warned the United States that the Asian country is ready to use the rare minerals, thus responding to the trade war between the world’s two most powerful economies. On the other hand, the Chinese giant Huawei Technologies filed a lawsuit at a US court for a summary ruling in the case against the US government. This is another attempt by the manufacturer of telecommunication equipment to fight against Washington’s sanctions, which threaten to push it out of the world markets. The lawsuit, filed late Tuesday in the Texas District Court demands that the National Defense Authorization Act (NDAA) of 2019 be declared unconstitutional in an up-to-date version of the case filed by the telecoms manufacturer in March.
In South Korea, the index Kospi reported a decline of 25.51 points, or 1.25%, to 2,023.32 points.
Australian index S&P ASX 200 declined by 0.69% to 6,440 points, with BHP Billiton shares rising by 1.28%.
European markets mid-session recap
European shares continued to tumble Wednesday amid worries over the US-China trade war and a potential budget standoff between Italy and the EU.
The pan-European index Stoxx 600 sank by 1.42% to 370.56 points at 10:00 GMT. The index declined to its lowest point since March 11, basic resources leading the losses with a 2% decline as all sectors tumbled during the morning session. Technology, construction and materials, retail and bank stocks were all down more than 1.5% during the morning session.
German index DAX 30 is trading with a decline of 160 points, or 1.33%, to 11.867.29 points. The German unemployment unexpectedly rose for the first time in almost two years as the economic slowdown finally started to take a toll on the labor market. The number of people out of work unexpectedly climbed by 60,000 in May, compared with economists’ forecasts for a decline of 8,000. The jobless rate also rose, to 5% from a record-low 4.9%. The stocks of Porsche Automobil Holding fell by 2% after the company’s offices raided in a corruption probe. This, in combination with trade tensions, seriously affected the stocks of other carmakers with Volkswagen and Daimler wiping out 1.3% and 1.05%, respectively. The shares of chemical giant BASF are down by 1.5%, while pharmaceutical company Bayer wiped out 2.4% of its market capitalization. Financial stocks were also into the red with Deutsche Bank declining by 2% and Commerzbank falling by 1.3%.
French index CAC 40 is down by 93 points, or 1.75%, to 5,219.69 points at mid-session trading. The country’s economic growth eased slightly in the first quarter after revision, detailed results from the statistical office Insee showed Wednesday. The Gross domestic product grew by 0.3% sequentially, in line with the estimate released on April 30, but slightly slower than the revised 0.4 percent expansion seen in the fourth quarter of 2018. Meanwhile, the inflation in France slowed down sharply in May to 1.0% YoY, after reporting 1.3% in April. The stocks of Peugeot are down by 1.6%, but the other major carmaker in the country, Renault, still benefits from the merger talks with Fiat and reports increase of 0.4%. The shares of Airbus are down by 2% amid continuing trade tensions.
The British blue-chip index FTSE 100 is trading down by 1.46% to 7,162.61 points at 10:00 GMT. London’s listed mining companies, focused on more traditional industrial metals and a large part of the bluechip index, fell from one-month highs as worries about the trade war’s impact on global growth hit home. The oil majors BP and Shell were also among the top drags on the main index as oil prices sank globally. The stocks of British American Tobacco fell by 2.4%, a day after data from Nielsen showed cigarette industry volumes deteriorated in the four weeks to May 18.
Wall Street pre-session recap
The US stock index futures were sharply lower Wednesday morning, as ongoing trade tensions fueled worries about the global growth outlook.
Around 6:05 a.m. ET, Dow futures indicated a negative open of more than 150 points. Futures on the S&P and Nasdaq were also both pointing lower.
Risk aversion has increased in recent days, with disappointing economic data in major economies reawakening fears of a global recession.
On the data front, the Richmond Fed manufacturing survey for May is expected at around 10 a.m. ET, with Dallas Fed services data set to follow slightly later in the session.