After brutal 2018, world stocks nurse New Year's hangover

Shares sag as China contracts

04 January 2019 | Sakenuus
Sujata Rao
World shares began 2019 on a downbeat note, oil prices and bond yields skidded lower and the Japanese yen strengthened on Wednesday as data from China to France confirmed investors' fears of a global economic slowdown.

The US S&P500 and Dow Jones index futures slipped around one percent and Nasdaq futures fell 2%, signalling Wall Street would open in the red on the first trading day of the New Year after closing 2018 with the worst annual loss since 2008.

Weak manufacturing-activity surveys across Asia were followed by disappointing numbers in the euro zone, sending MSCI's index of world shares 0.4% lower.

China in particular was in focus, after factory activity contracted for the first time in over two years. The gloom continued in Europe, where the Purchasing Managers' Index for the eurozone reached its lowest since February 2016. Future output PMIs were at a six-year low .

Commodities

The data suggests there will be no respite for equities or commodities after the 2018 losses.

A pan-European share index recovered some losses to stand 0.6% lower. The Paris bourse led losses with a 1.4% fall, as France's PMI fell in December for the first time in two years.

“It's a continuation of the worries over growth. You can see them in the Asian numbers, which all confirm that we have passed peak growth levels,” said Tim Graf, chief macro strategist at State Street Global Advisors.

The knock-on effects from China's slowdown and global trade tensions were rippling across Asia and Europe, he said.

“I don't think the trade story goes away, and Europe, being an open economy, is still vulnerable,” Graf added.

Copper, a key gauge of world growth sentiment, fell to 3 1/2-month lows , while Brent crude futures lost almost 1% after shedding 19.5% last year.

Commodity currencies' losses were led by the Australian dollar. Often used as a proxy for China sentiment, the Aussie fell as much as 0.7% to its lowest since February 2016.

There were also renewed fears in Europe over the clean-up of Italy's banks, with trading in shares of Banca Carige suspended. Carige failed last month to win shareholder backing for a share issue that was part of a rescue plan. An index of Italian bank shares fell 2.5%.

Safety first

The stock market rout drove investors into the safety of bonds. Ten-year German Bund yields slumped to 20-month lows of 0.16%, their biggest one-day fall in two years.

Gold and the yen benefited too.

While gold topped six-month highs, the yen extended its rally against the dollar to seven-month highs around 108.9. It strengthened to 19-month peaks against the euro.

“Traditional safe-haven type flows are going into the yen. As we see increased volatility [on world markets], Japanese [investors] are probably repatriating foreign assets,” said Charles St Arnaud, senior investment strategist at Lombard Odier Investment Managers.

However, the dollar edged up 0.3% against a basket of currencies, rising half a percent to the euro and 0.8% versus sterling.

The greenback is under pressure from a fall in US Treasury yields as investors wager the Federal Reserve will not raise rates again. While the Fed itself still projects at least two more hikes, money markets imply a quarter-point cut by mid-2020.

Yields

Yields on two-year debt have tumbled to 2.49% from 2.977% peak in November. Ten-year yields dived to their lowest since last January at 2.647%.

The spread between two- and ten-year yields has in turn shrunk, narrowing last month to the smallest since 2007 and heading towards an inversion which has portended recessions in the past.

The German 2-10 yield curve is the flattest since November 2016.

“What is clear is that the global synchronised growth story that propelled risk assets higher has come to the end of its current run,” OCBC Bank told clients.

“Inexorably flattening yield curves ... have poured cold water on further policy normalisation going ahead.”

– Nampa/Reuters

Soortgelyk

 

SDFN houses at Kalkfeld nearing completion

7 ure gelede | Infrastruktuur

KALKFELD – The construction of 18 houses by the Shack Dwellers Federation of Namibia (SDFN) is nearing completion at the Kalkfeld settlement in the Otjozondjupa...

Manlike pasiënt 'twee keer' besny

7 ure gelede | Ministeries

Henriette Lamprecht Die ministerie van finansies het 'n forensiese ondersoek na die eispatrone van verskaffers van gesondheidsdienste van stapel gestuur om moontlike bedrog by die...

Kaptein wou terugdraai voor 157 sterf

7 ure gelede | Ongelukke

Ronelle Rademeyer Die kaptein van Ethiopian Airlines se vlug ET302 het toestemming gehad om die vliegtuig terug te draai na die Internasionale Lughawe Bole by...

Só vaar die Verkrygingsraad

7 ure gelede | Ministeries

Augetto Graig Struikelblokke kan in geleenthede omskep word. Só sê me. Lischen Ramakhutla, die Sentrale Verkrygingsraad van Namibië (CPBN) se administratiewe hoof.Sy en mnr. Patrick...

Weer vir 11 Maart 2019

7 ure gelede | Weer

BINNELAND: Gedeeltelik bewolk en warm tot baie warm in die Noorde, Noordooste, Ooste en sentrale hoogland met geïsoleerde donderbuie op plekke. Elders sal dit...

Ou beursbeleid finansier 'enige' student

7 ure gelede | Onderwys

Henriette Lamprecht - “As jy van die begin af nie gehad het wat nodig is nie, gaan jy dit ook nie aan die einde...

Stem nou vir jou gunstelingpaartjie!

7 ure gelede | Gebeure

D'Arlin en Leigh-Ann Benade is een van die top-30-paartjies in Republikein se Bruidspaar van die Jaar-kompetisie. Een gelukkige leser, wat aan ons SMS-kompetisie deelneem, kan...

Namibiër ’n top-uitvinder

7 ure gelede | Gesondheid

Henriette Lamprecht – ‘n Namibiër is een van 30 finaliste uit 2 400 inskrywings in die Wêreldgesondheidsorganisasie (WHO) se eerste uitdaging vir vernuwing op die...

Só is SME Bank geplunder

7 ure gelede | Howe

font face="Verdana" > Catherine Sasman - Die SME Bank-saak lees soos 'n stap-vir-stap gids vir 'n bankroof. Só het adv. Raymond Heathcote, wat namens die...