Stocks pare losses but economic concerns linger

Traders and financial professionals work at the opening bell on the floor of the New York Stock Exchange (NYSE), January 2, 2019 in New York City. (AFP)
Updated 03 January 2019
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Stocks pare losses but economic concerns linger

NEW YORK: Stocks recovered much of their losses on Wednesday as investors took advantage of cheaper shares to ring in the new year, but lingering economic concerns from weak Chinese and European data boosted safe-haven assets including benchmark US Treasury notes and the Japanese yen.

Data showed Chinese factory activity contracting for the first time in more than two years. The Purchasing Managers’ Index (PMI) for the euro zone also reached its lowest level since February 2016, and France’s PMI fell in December for the first time in two years. Concerns about the flagging global economy contributed to US stocks posting a loss in 2018 for the first time in a decade.

The US benchmark S&P 500 stock index dropped as much as 1.6 percent on the data, but moved higher to fluctuate between positive and negative territory as the session continued. Bank and energy shares, which have been especially hard-hit in recent sell-offs, were among the biggest gainers.

Energy shares also benefited from a jump in oil prices, which climbed as US stocks recovered.

“We’re at levels that are really, really oversold, and that’s where bounces really come from,” said Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee. “Slowing China growth isn’t anything new, and that’s what led to today’s bounce.”

Still, MSCI’s gauge of stocks around the globe dropped 0.45 percent. Asian markets as well as the pan-European STOXX 600 closed lower.

Reflecting lingering investor nervousness, yields on US 10-year Treasury notes fell, earlier hitting an 11-month low. However, the boost in oil prices pushed up yields on short-dated maturities, flattening the yield curve. An inverted yield curve is widely seen as an indicator of a future recession.

“The yield curve is signaling that something is wrong,” said Matt Miskin, market strategist at John Hancock Investments in Boston. “The underlying economic data continues to suggest
a slowdown.”


US-China trade deal hopes grow as oil prices decline

Updated 19 June 2019
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US-China trade deal hopes grow as oil prices decline

  • Data suggested a smaller-than-expected fall in American crude inventories
  • Preparations underway for Donald Trump to meet Xi Jinping next week at the G20 summit in Osaka

LONDON: Oil prices declined on Wednesday as data suggested a smaller-than-expected fall in American crude inventories, as hopes for a US-China trade deal continue to grow.
Brent crude futures were down 51 cents at $61.72 a barrel.
US West Texas Intermediate crude fell 25 cents to $53.65 a barrel. On Tuesday, it had recorded its biggest daily rise since early January.
After weeks of swelling, US crude stocks fell by 812,000 barrels last week to 482 million, the American Petroleum Institute said on Tuesday, a smaller fall than the 1.1-million-barrel drop analysts had expected.
Official estimates on US crude stockpiles from the US government’s Energy Information Administration are due during afternoon trading.
US President Donald Trump offered some support, saying preparations were underway for him to meet Chinese President Xi Jinping next week at the G20 summit in Osaka, Japan, amid hopes a trade deal could be thrashed out between the two powers. Trump has repeatedly threatened China with tariffs since winning office in 2016.
European Central Bank President Mario Draghi also offered a boost, saying on Tuesday that he would ease policy again if inflation failed to accelerate.
Tensions remain high in the Middle East after last week’s tanker attacks. Fears of a confrontation between Iran and the US have mounted, with Washington blaming Tehran, which has denied any role.
Trump said he was prepared to take military action to stop Iran having a nuclear bomb but left open whether he would approve the use of force to protect Gulf oil supplies.
On Wednesday, oil markets shrugged off a rocket attack on a site in southern Iraq used by foreign oil companies.
“It is interesting to note that the crude oil futures market could not rally on hawks planting bombs in the Strait of Hormuz but could rally on doves planting quantitative easing,” Petromatrix’s Olivier Jakob said in a note.
“This is an oil market that doesn’t know how to react when an oil tanker blows up but knows how to react when the head of a central bank makes some noise.”
Members of the Organization of the Petroleum Exporting Countries have agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.