Global stocks sink on soft China data

May 16, 2018

World stocks fell on Tuesday as investors digested soft Chinese economic data and a lack of progress in US-China trade talks, though oil companies were a bright spot as crude hit a three-and-a-half-year high.

MSCI’s world equity index, which tracks shares in 47 countries, was down 0.3 per cent.

Futures pointed to a lower open for US equities, with S&P 500 e-minis down 0.2 per cent.

European stocks snapped early losses, with the benchmark Stoxx 600 rising 0.2 per cent and helped by oil stocks, that rose by nearly a per cent.

The UK’s FTSE 100 and Italy’s FTSE MIB, both of which have high weightings to energy stocks, rose by 0.4 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2 per cent, after China reported weaker-than-expected investment and retail sales in April and a drop in home sales, clouding its economic outlook even as policymakers try to navigate debt risks and defuse a heated trade row with the United States.

Mixed messages in US-China trade talks also weighed on sentiment for global investors.

The two countries are still “very far apart” on resolving trade frictions, US ambassador to China Terry Branstad said on Tuesday as a second round of high-level talks was set to begin in Washington.

US President Donald Trump drew ire from lawmakers after suggesting he would help Chinese firm ZTE Corp, that flouted US sanctions on trade with Iran and North Korea, with intelligence officials also saying the decision threatens national security.

“Sino-U.S. trade negotiations have provided mixed signals, the White House promising conciliation (over ZTE) then indicating that some form of punishment is still in the cards,” said Mike van Dulken, head of research at Accendo Markets.

Oil prices hit a 3-1/2-year high on Tuesday, supported by tight supply and planned US sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

Brent crude futures, the international benchmark for oil prices, rose to as much as $79.22 per barrel, its highest level since November 2014.