Dhaka, Bangladesh
Global shares slip on weak China growth

Global shares slip on weak China growth

Business Desk World stocks slipped after China posted its weakest growth rate in nearly three decades on Friday, while the dollar was set for its worst week in almost four months having been pummeled by pound and euro Brexit rallies. China's economy grew a slightly less-than-expected 6 per cent in the third quarter, leaving traders hoping that the swift stimulus Beijing and the major global central banks have provided in recent weeks will fend off a more serious downturn. Main European bourses fell a modest 0.1 per cent-0.3 per cent after Asia had been led lower by a 1.2 per cent slump in top Chinese shares .CSI300. There was also a sharp reverse in car shares after a Renault profit warning. "You can't get away from the fact that China is slowing, but it's not slowing more than we thought," said head of global macro strategy at State Street Global Markets Michael Metcalfe. "We know that Q4 is going to be a soft patch, but to a degree policymakers are ahead of this, so as long as we don't have an escalation of the trade war now I think markets can handle it." In currencies, sterling was taking a breather at $1.2850, having scored its best six-day streak in near 30 years on Thursday after Britain and the EU sealed a new Brexit deal. Doubts about whether the deal will be approved in the British parliament were still sky high, though, with swathes of lawmakers, who are either reluctant about Brexit or worried the deal is not a clean enough break, due to debate the deal in a rare Saturday sitting. "Whatever was agreed last night with the EU still has to go through the British parliament... the uncertainty surrounding that still hasn't changed one iota," said James McGlew, executive director of corporate stockbroking at Argonaut. The euro rested at $1.1125, not far from $1.1140, its highest since Aug. 26. The dollar remained weak too having seen this week's weak retail sales data and more US interest rate cut talk contribute to its biggest weekly slide since June. Helping to alleviate immediate trade war worries, China had said on Thursday that it hoped to reach a phased agreement in its trade dispute with the United States as soon as possible. Investors were also encouraged by upbeat earnings from Netflix and Morgan Stanley, but poor results from International Business Machines Corp and weak US economic data weighed. Housing starts, industrial production and mid-Atlantic factory output all fell short of economists' expectations. Reflecting the cautious mood, the safe-haven yen strengthened, with the dollar falling 0.13 per cent to 108.51. The yield on benchmark 10-year Treasury notes edged up though to 1.764 per cent, compared with a US close of 1.755 per cent on Thursday. Euro zone bond yields were also nudging up with German Bund yields holding at -0.40 per cent, the highest since early August. The Bund yield is now up 16 bps since Irish and British leaders said on Oct. 10 they saw a path to a Brexit deal, which boosted risk appetite and weakened demand for safe-haven assets like bonds. In commodities, oil fell on the China data, with Brent crude LCOc1 easing 0.52 per cent to $59.60 and US crude CLc1 dropping 0.19 per cent to $53.83. "The (China) GDP print has weighed on short-term sentiment and we have seen regional stock markets and oil contracts edge lower because of that," said Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA. Crude demand growth tends to track economic growth trends, but Halley said China's need for oil would not recede any time soon. Underlining that view, Chinese official data released on Friday showed robust refinery throughput in September, rising 9.4 per cent from a year earlier to 56.49 million tonnes, on increases from new refineries and some independent refiners resuming operations after maintenance. In Asia, Tokyo's benchmark Nikkei index closed higher on Friday following rallies on Wall Street in cautious trade ahead of the British parliament's vote on a new Brexit deal. The Nikkei 225 index rose 0.18 percent, or 40.82 points, to 22,492.68, but the broader Topix index was down 0.13 percent, or 2.17 points, at 1,621.99. "The US rallies are seen supporting Japanese stocks in the early hours of trade, but investor appetite for taking a risk and buying is limited ahead of the UK parliament's vote over Brexit," Okasan Online Securities said in a commentary. Wall Street stocks rose Thursday partly due to progress in Brexit talks after Britain and the European Union announced a new deal. Analysts welcomed the news that British Prime Minister Boris Johnson reached an agreement with EU leaders on a divorce deal that amends the prior deal's provisions on the border between Northern Ireland and the Republic of Ireland. However, Johnson faces an uphill battle getting it through parliament. Dealers were also closely watching China's GDP figures for the third quarter due later in the day, analysts said. Shortly before the opening bell, Japan's internal affairs ministry released data showing the country's core consumer price index edged up 0.3 percent year-on-year in September, slowing from a 0.5 percent rise the previous month. The latest data underpins the challenge the Bank of Japan faces in achieving its longstanding two-percent inflation target. The dollar fetched 108.65 yen in early Asian trade, against 108.62 yen in New York late Thursday. In Tokyo, China-linked shares were higher, with industrial robot maker Fanuc up 2.15 percent at 21,065 yen and electronic parts maker Rohm up 1.01 percent at 9,000 yen. Market heavyweight and Uniqlo casual wear operator Fast Retailing was up 0.99 percent at 69,940 yen. Shares in Hong Kong and Shanghai sank on Friday after data showed China's economy growing at its slowest pace for almost 30 years. The Hang Seng Index fell 0.48 percent, or 128.91 points, to 26,719.58. The benchmark Shanghai Composite Index fell 1.32 percent, or 39.19 points, to 2,938.14, while the Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 1.17 percent, or 19.20 points, to 1,616.72. Earlier on Thursday, Wall Street stocks rose after Britain and the EU announced a new Brexit deal and as Netflix and Morgan Stanley gained on solid earnings. Analysts welcomed news that British Prime Minister Boris Johnson reached an agreement with European Union leaders on a divorce deal that amends the prior agreement's provisions on the border between Northern Ireland and the Republic of Ireland. Markets shrugged off opposition to the agreement from Northern Ireland's Democratic Unionist Party, which could potentially sink the agreement. Alan Skrainka of Cornerstone Wealth Management acknowledged there were doubts about the deal's prospects but said "this is really the first tangible sign of progress we've had in some time." The Dow Jones Industrial Average added 0.1 percent, closing at 27,025.88. The broad-based S&P 500 climbed 0.3 percent to 2,997.95, while the tech-rich Nasdaq Composite Index advanced 0.4 percent to 8,156.85. Besides Brexit and developments in the grinding US-China trade war, investors have been focused on corporate earnings this week. The latest batch of results were mixed, with IBM diving 5.5 percent after reporting a four percent drop in revenues to $18.0 billion. But Netflix gained 2.5 percent as it reported a 65 percent increase in quarterly profits to $665 million and executives expressed confidence despite increased competition from Disney, Apple and others in video streaming. Morgan Stanley advanced 1.5 percent after reporting a 2.9 percent increase in quarterly earnings to $2.2 billion, due in part to a strong performance in its trading division. Among other companies reporting results, Alcoa surged 6.0 percent and Honeywell International gained 2.4 percent. Sterling faltered on Thursday and Europe's main stock markets went in and out of the red as hopes for a smooth Brexit ran into familiar Irish border snags. Asia earlier saw a five-day stocks rally grind to a halt as Wednesday's disappointing US retail sales data on spread gloom, including to the dollar, though even there traders were watching Brexit. Ongoing Brexit talks passed various deadlines, but the main development was Northern Ireland's Democratic Unionist Party saying that it could not support proposed solutions to Irish border checks. DUP support is considered crucial for any deal. Sterling, which had shot to five-month highs, fell as much as 0.6 per cent against the dollar to $1.2748 and 0.5 per cent against the euro to as low as 86.81 pence, before steadying and regaining some ground. Everything else was frozen. The pan-European barely budged, and in bond markets UK Gilts, German Bunds and most other government debt were treading water after a week of rising yields. "Brexit's the only show in town today"," said Lyn Graham-Taylor, fixed income strategist at Rabobank. He said he expected Britain to seek an extension to the Oct. 31 departure date. But investors were looking for a reason to sell, he said, and would be studying the tone in which any Brexit delay was sought. "An extension with a positive tone would see a positive selloff," he said. Turkish markets remained in focus after the country's military advance in Syria created tensions with United States and Europe and brought about mild sanctions. Turkish President Tayyip Erdogan is to meet with US Vice President Mike Pence and Secretary of State Mike Pompeo later. Although the US pulled its troops out of the area to allow Turkey's push, Pence and Pompeo are expected to urge Erdogan to declare a ceasefire, which Erdogan says will "never" happen. US President Donald Trump warned of "devastating" sanctions if discussions did not go well. Turkish stocks were down 1.8 per cent and the lira weakened to 5.8877 to the dollar. It has lost nearly 5 per cent this month, making it the world's worst performer for October. In Asia, Tokyo stocks closed marginally lower on Thursday, taking a breather from a recent string of gains as investors watched for developments in Brexit talks in Brussels. The benchmark Nikkei 225 index fell 0.09 percent, or 21.06 points, to 22,451.86, snapping a four-day winning streak. The broader Topix index was down 0.45 percent, or 7.35 points, at 1,624.16. "It is only natural that the market takes a break after the Nikkei rallied more than 1,000 points in the past four trading days," said Seiichi Suzuki, senior market analyst at Tokai Tokyo Research Institute. "We can say the bottom is solid, as is the US market."

Share |