Stocks Falter as Chinese Economy Feels Trade Pressure
Concerns over the global economy mounted Friday following disappointing readings from China and the eurozone, sending stocks lower on the day and wiping out most of the week’s gains.
The Stoxx Europe 600 was down 1% following a 2% drop in Japan’s Nikkei and a 1.6% fall in Hong Kong’s Hang Seng Index. Futures pointed to a 0.9% opening drop for the S&P 500 and Dow Jones Industrial Average, with Starbucks and Costco Wholesale leading declines in premarket trading.
Friday’s losses came as data showed China’s economic downturn deepened last month more than economists expected as Beijing works to halt a slowdown while grappling with a trade conflict.
Official figures showed a November slowdown in industrial production amid issues among auto makers and property markets, while growth in retail sales dropped to its lowest level in more than 15 years.
“For a while, the Chinese economy was the extra bit that kept the global total going,” said Alastair Winter, chief economist at Daniel Stewart & Co. “I do think the Chinese economy is slowing quite a lot,” he added, noting that is one reason Germany’s benchmark DAX index in total return terms is down more than 20% from its peak in January.
Mao Shengyong, a spokesman for China’s National Bureau of Statistics, said China’s economic growth was nonetheless on track to achieve its annual target in 2018.
Adding to the downbeat tone Friday, purchasing managers’ surveys separately showed that French business activity unexpectedly contracted for the first time in 2½ years, according to IHS Markit, while German surveys also missed expectations.
That came a day after the European Central Bank cut its economic growth forecasts, highlighting the climate of uncertainty around trade tensions and market volatility. The European economy, and particularly its German export engine, are sensitive to changes in world trade and Chinese demand.
In European trading Friday, assets closely linked to the Chinese and global economy, including auto and parts, technology and mining companies, led declines. Copper futures were down 0.9% and many global mining companies followed it lower, given China is the world’s largest consumer of the industrial metal.
Investors in the region were also continuing to parse the latest Brexit updates after British Prime Minister Theresa Mayran into fresh trouble in Brussels on Thursday with her efforts to persuade her European Union counterparts to sweeten the Brexit deal.
The British pound was down 0.5% at $1.2585, while the euro fell 0.5% to $1.1305.
In Asia, technology, health-care and materials companies led most of the losses on Friday. The Shanghai Composite fell 1.5% while Shenzhen’s All Share index fell 2.5%, with Chinese health-care companies tumbling on speculation about potential price cuts.
The Australian dollar, closely linked to the Chinese economy, was down 0.8% against the U.S. dollar.
Friday’s moves came after world stocks had rebounded earlier this week as The Wall Street Journal reported that China was set to introduce an industrial policy that is friendlier to foreign businesses and President Trump said on Twitter earlier in the week that “productive” trade talks were under way.
Many economists expect the trade conflict to continue despite a 90-day tariff truce that Mr. Trump and his Chinese counterpart, Xi Jinping, reached in early December.