Global stocks slipped on Thursday, with investors still cautious over the state of the global economy and tensions between the US and China rising.
European stocks fell at the open, with the FTSE 100 down 0.8 per cent, and Germany’s Dax and the CAC 40 in France each falling 1.2 per cent.
Surveys of business activity due to be released throughout the European morning will offer a new glimpse into the state of the region’s economy, although traders have tended to look through much of the weak data that have been released since lockdowns began at the end of the first quarter.
Economists at Jefferies, who are aggregating real time data such as congestion, transportation and energy consumption, said that economic output in the eurozone continued to recover and that “Germany remains ahead of the pack in terms of getting its economy back on track”.
Futures trade pointed to falls of about 0.8 per cent for the US benchmark S&P 500 when Wall Street opens later in the day.
The US president escalated his verbal attacks on China late on Wednesday, as he accused Beijing of “a massive disinformation campaign” around the origins of coronavirus.
“They could have easily stopped the plague, but they didn’t!” Donald Trump said, referring to Covid-19.
Several strategists and economists expect tensions between the world’s two largest economies to continue to rise ahead of November’s general election.
“Tensions between China and the United States continue to ratchet up higher following a slow path of escalation, as widely expected given the elections,” said Sebastien Galy, strategist at Nordea Asset Management.
“It is in neither party’s interest to boil it over, especially in the United States given the feedback loop in the equity markets.”
Global equity markets have rallied since late March on a combination of central bank support and hopes of a vaccine and a strong rebound in business and industrial activity once governments ease lockdown measures.
But momentum has stalled throughout May despite some sharp daily swings, with many economists watching the easing of lockdowns in western countries for signs of success, or a new wave of infections.
Overnight, shares in Asia weakened despite the S&P 500 closing 1.7 per cent higher on Wednesday after minutes from the US central bank suggested it was ready to further support the world’s biggest economy if there were additional outbreaks of the virus.
Japan’s benchmark Topix index fell 0.2 per cent while China’s CSI 300 of Shanghai and Shenzhen-listed stocks shed 0.5 per cent and Hong Kong’s Hang Seng index dropped 0.3 per cent.
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An early reading on exports from South Korea again highlighted the destruction to global demand that the virus has caused and the difficulties in restarting economies following lockdowns. Shipments from Asia’s fourth-largest economy for the first 20 days of May shrank more than 20 per cent year on year as imports fell almost 17 per cent, official data showed on Thursday.
“The upshot of today’s figures is that April’s weakness has continued into May,” said Alex Holmes, Asia economist at Capital Economics. “And this is also likely to be true for elsewhere.”
Japanese trade data for April were also weak, with a nearly 22 per cent contraction in exports marking the worst month since 2009.
In currencies, the pound slipped 0.3 per cent against the dollar to just under $1.22. Andrew Bailey, Bank of England governor, on Wednesday said that negative interest rates were under “active review” after claiming last week that such a policy was not under consideration. The UK sold negative-yielding government bonds for the first time on Wednesday.
Oil prices extended Wednesday’s rally, which came after an Energy Information Agency report showed that US crude oil inventories fell for a second straight week.
Brent crude, the international benchmark, rose 1.6 per cent to $36.30 a barrel. West Texas Intermediate, the US marker, rose 1.7 per cent to $34.10 a barrel.
The yield on US 10-year Treasuries slipped 0.014 percentage points to 0.6655 per cent, as investors moved into the debt.