Wednesday 08.05 GMT
What you need to know
- European and Asian bourses start year with declines, US set to follow
- China manufacturing sector contracts, adding to global slowdown fears
- Yen climbs to fresh 6-month high amid demand for haven assets
- Oil prices fall further
Stock markets made a gloomy start to 2019, with investors in a cautious mood at the start of a year featuring a lengthy list of risk factors, from the threat of a disorderly Brexit to concern at a global economic slowdown.
The sustained declines for equities followed on from the worst year for global stock markets since the financial crisis in 2008, with the impact of the trade war between the US and China on a stuttering world economy at the forefront of concern.
European bourses were tracked losses in Asia, after economic data pointed to a contraction for China’s manufacturing sector, adding to the worries.
London’s FTSE 100 fell 1.4 per cent, with Frankfurt’s Xetra Dax 30 in Frankfurt down 1 per cent, after wider losses in Asia. US futures also predicted losses, of 1.2 per cent for the S&P 500.
Haven assets were in demand, with gold up 0.3 per cent at $1,285.41 an ounce and the Japanese yen stronger by 0.5 per cent against the dollar at ¥109.19, a six-month high.
Hong Kong’s Hang Seng fell almost 3 per cent after a private survey showing that China’s manufacturing sector contracted in December for the first time in 19 months. The Caixin-Markit manufacturing purchasing managers’ index dropped from 50.2 in November to 49.7, below the 50-point level separating expansion from contraction and worse than the 50.1 reading forecast by economist in a Reuters poll.
ING economist Iris Pang said the figures supported the view that the Chinese economy was weak and that “stimulus needs to arrive quickly”. The impact of the US-China trade war on export growth combined with the knock-on effect on domestic demand, could pose a risk to job security and create a “vicious downward circle”, she added.
“As a result, we expect the Chinese government to speed up the delivery of infrastructure investment to support the economy,” Ms Pang said.
The 2.9 per cent fall for the Hang Seng was the worst in the Asia-Pacific region. Its financial and technology sectors were under the most pressure. The Hang Seng China Enterprises index of Hong Kong-listed Chinese companies was down 2.7 per cent.
On China’s mainland, the CSI 300 lost 1.4 per cent, to its weakest closing low since March 2016.
Australia’s S&P/ASX 200 was down 1.3 per cent, with both financials and basic materials dropping 1.4 per cent.
Equities markets in Japan were closed for a public holiday.
On Wall Street in the last trading session of 2018, the S&P 500 managed modest gains on the heels of a phone call between the US President Donald Trump and his Chinese counterpart Xi Jinping, which Mr Trump described as “long and very good”. But the index ended the year down 6.2 per cent, while the FTSE All World Index shed 11.5 per cent.
The dollar index was flat, while the UK pound was 0.2 per cent weaker at $1.2731 and the euro slipped 0.2 per cent to $1.1445.
China’s onshore renminbi, which is permitted to trade 2 per cent either side of a daily midpoint set by the country’s central bank, was 0.3 per cent stronger at Rmb6.8560 per dollar, having hit a three-week high against the greenback on its last trading day in 2018. The onshore renminbi was a touch weaker at Rmb6.8716.
Oil prices started the new year with gains, but the positive start was shortlived. Brent crude was down 1.1 per cent at $53.21 a barrel, reversing an early advance, while West Texas Intermediate was down 1 per cent at $44.95 a barrel.
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