Weak China data hits stocks, eyes still on stimulus
NEW YORK, Aug 10 — Global shares lost momentum today, falling for the first time in five days after weak Chinese trade data, though declines were limited by expectations policymakers could act to shore up the world’s economies.
Stock markets’ recent rally has been underpinned by comments by European Central Bank President Mario Draghi two weeks ago that the central bank was “ready to do whatever it takes to preserve the euro,” raising hopes of heavy bond buying to aid Spain and Italy.
A lower than expected reading in China’s July exports today, however, soured the mood. In addition, new bank loans in China were at a 10-month low, suggesting pro-growth policies have been slow to gain traction and that more urgent action may be needed.
The weakness in exports was in part due to slower demand from Europe.
“The data was not bad, it was horrendous,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
“China’s export problem is an external problem and it has to do with Europe,” he added. “After these numbers, investors may want to see (stimulus) activity fairly quickly, especially from the ECB.”
Some economists said the Chinese central bank could move as early as this weekend to ease policy.
European and US stocks were modestly weaker in midday trade, while the data also dampened the euro.
“After such a rally, people are tempting to book a bit of profit. It’s just healthy, investors are catching their breath,” said Isabelle Enos, deputy head of asset management at B*Capital, in Paris.
Limbo in the euro zone kept equities markets in check.
Next week, second-quarter gross domestic product data is expected to show the euro zone economy contracted.
Hopes are high that the ECB will step in with bond purchases to ease borrowing costs for Spain and Italy. But until details emerge — including the strings attached to any support — investors will be wary.
The euro struggled against the dollar as investors took a cautious stance. The currency slid 0.1 per cent to US$1.2297, off a one-month high of US$1.2443 struck on Monday and falling to a one-week low of US$1.2239.
“Despite what the ECB is saying, you’re seeing risk sentiment reverse,” said Lucy Lillicrap, senior risk consultant at global payments company AFEX Markets Plc in London.
The FTSEurofirst 300 index of top European shares provisionally ended down 0.1 per cent, while the MSCI’s world equity index was off 0.2 per cent.
The Dow Jones industrial average slipped 15.76 points, or 0.12 per cent, at 13,149.43. The Standard & Poor’s 500 Index was down 1.88 points, or 0.13 per cent, at 1,400.92. The Nasdaq Composite Index was down 7.49 points, or 0.25 per cent, at 3,011.15.
In New York, shares of football club Manchester United were flat on their first day of trading. The stock was near its offer price of US$14.
The benchmark 10-year US Treasury note was up 11/32, the yield at 1.6573 per cent.
Fears of a new world food crisis were heightened today by a US government report that showed domestic and soybean crops have been slashed even more than expected by the worst drought in half a century and will fail to replenish ultra-low stockpiles.
Corn prices briefly touched another record high before easing after the report said the soaring cost of the grain would hit demand.
CBOT December corn was down 0.2 per cent at US$8.22 a bushel after setting an all-time high of US$8.49.
Oil markets were lower after the International Energy Agency cut its demand forecasts for next year and said crude stocks were rising.
Brent crude fell 70 cents to US$112.52 a barrel, while US crude was down 55 cents at US$92.82. — Reuters