Global stocks struggle as hopes fade for trade and Brexit deals
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[October 09, 2019]
By Tommy Wilkes
LONDON (Reuters) - European stocks steadied
on Wednesday, but sentiment remained fragile as negotiations for a
Brexit withdrawal deal seemed all but dead and the U.S.-China trade
dispute triggered another round of selling.
Markets dropped this on concern the U.S.-China conflict over trade and
foreign policy is nowhere near a resolution and is increasingly damaging
the global economy.
Asian stocks suffered their biggest fall in a week on Wednesday,
following heavy losses on Wall Street and in Europe on Tuesday.
European shares managed to find a floor, however, with the pan-European
Euro STOXX <.STOXX> inching up 0.1%. Germany's DAX <.GDAXI> rose 0.48%,
France's CAC 40 <.FCHI> 0.24% and Britain's FTSE 100 <.FTSE> 0.28%.
Washington and Beijing are engaged in a year-long row that has expanded
beyond trade policy, suggesting even more damage to a global economy
that is already showing signs of slowing.
Hopes that the two sides could reach a truce this week faded after
Donald Trump's administration introduced visa restrictions on Chinese
officials and added more Chinese companies to a U.S. trade blacklist.
A U.S. official said high-level trade talks would still take place on
Thursday and Friday as planned, but Trump has said tariffs on Chinese
imports will rise on Oct. 15 if no progress is made in the negotiations.
Washington is also moving ahead with discussions about restrictions on
capital flows into China, Bloomberg reported.
"U.S./China trade newsflow seemed to take a backward step ahead of
important talks this week and UK/EU Brexit talks not only unraveled but
the relationship between the two sides seems to be in danger of breaking
down completely," said Jim Reid, an analyst at Deutsche Bank.
"So the obvious cracks that have been appearing over more than four
decades of globalization are in danger of widening significantly in the
days and weeks ahead."
U.S. stock futures <ESc1> rose 0.34%, following a 1.56% drop for the S&P
500 <.SPX> on Tuesday in response to the U.S. visa restrictions.
Oil prices fell for a third consecutive day as traders worried about the
impact of the U.S.-China tensions on global demand.
The U.S. Treasury yield curve steepened after U.S. Federal Reserve Chair
Jerome Powell signaled further interest rate cuts and the resumption of
bond purchases following a recent spike in money-market rates.
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The German share price index DAX graph is pictured at the stock
exchange in Frankfurt, Germany, October 8, 2019. REUTERS/Staff/File
Photo
BREXIT TALKS
In Europe, talks between the European Union and Britain over an
agreement to cover London's departure from the EU on Oct. 31
appeared to be going nowhere.
British lawmakers have voted to force Prime Minister Boris Johnson
to seek an extension to the departure date if he cannot agree a
deal, but the prospect of more prolonged political uncertainty is
worrying investors.
Sterling was last up 0.5% at $1.2280 <GBP=D3> after a media report
that the EU would make a major concession in the negotiations.
Many economists say markets have already priced in the failure to
reach a deal any time soon.
"In the interminably tedious EU-UK divorce process, things are
getting uninteresting. Tweets are being fired. Latin quotes are
being sent out. Markets did not expect a deal to be done, and so
should remain indifferent (unless it looks as if a no-deal exit will
be introduced in defiance of legislation)," said UBS economist Paul
Donovan.
Currency markets elsewhere were mostly quiet. With some semblance of
risk appetite returning, the safe-haven dollar fell, shedding 0.3%
against the euro to $1.0987 <EUR=>.
The offshore yuan, which fell on Tuesday, recovered 0.3% to 7.1413
yuan per dollar <CNH=EBS>.
In bond markets, U.S. Treasury and euro zone government bond yields
ticked higher.
The spread between two-year and 10-year Treasuries, the most common
definition of the yield curve, widened to 11.3 basis points
<US2US10=RR>.
Spot gold prices edged higher to $1,506 <XAU=>.
Brent crude futures fell 0.34% to $58.04 a barrel <LCOc1>. U.S. West
Texas Intermediate crude dropped 0.34% to $52.45 <CLc1>.
(Additional reporting by Stanley White in Tokyo)
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