Global Stocks Absorb Blow of Manufacturing Slowdown

By Max Bernhard 

-- European and Asian stocks lower

-- Industrial stocks lead the drop

-- Investors await ADP Jobs data

Global stocks fell Wednesday, led by drops in banks and industrial companies as investors expressed increasing worries about a global economic slowdown.

The Stoxx Europe 600 was down 1.4%, with Germany's DAX 1.2% lower and the U.K.'s FTSE 100 down 1.4%. In the U.S., S&P 500 futures were down 0.68%

Markets continued to react to disappointing economic data published Tuesday showing manufacturing activity was at its lowest point in a decade in the U.S. The figures came on top of downbeat data from the European Union, China and Japan.

Steel giant ArcelorMittal and Finnish construction machinery maker Konecranes were both among the biggest losers in Europe, falling 3.1% and 4% respectively.

Germany's leading economics research institutes jointly lowered their growth forecasts Wednesday for Europe's largest economy. They cited slowing global demand for capital goods, structural changes in the auto sector -- one of Germany's most important industries -- and political uncertainty.

"There hasn't been a single month this year where Germany has seen expansion in its manufacturing sector," said Michael Hewson, chief market analyst at CMC Markets, who expects the weakness in manufacturing to spill over into the services sector.

Investors are being cautious and "taking cash off the table" ahead of services and employment figures later in the week, Mr. Hewson added.

If the manufacturing slowdown spreads to the still robust service sector, this would increase pressure on the Federal Reserve to cut rates again in October, said Stefan Schilbe, HSBC Germany's chief economist.

Bank stocks in Europe fell Wednesday, with the Stoxx Europe 600 Banks index down 1.2%, reflecting unease about falling bond yields, which crimp lender profits. Banks' performance is also seen as highly correlated with economic growth. Swiss bank UBS Group was down 1.7%.

Among individual stocks, shares in U.K. bookmaking business Flutter Entertainment rose 21% after it agreed to merge with Stars Group, creating an online betting giant worth more than $11 billion.

European luxury-goods stocks traded lower ahead of an expected World Trade Organization ruling on the extent of tariffs the U.S. would be allowed to impose on some European goods, including luxury items and airplanes. LVMH traded 2.2% lower, Burberry was down 2.7% and Kering traded 3% lower.

In Asia, Korea's Kospi was down nearly 2% following news that North Korea fired at least one missile off its east coast. The move, seen as a show of strength, came after Pyongyang said it would resume official nuclear talks with the U.S. In Japan, the Nikkei fell 0.5% and Hong Kong's Hang Seng was down 0.2%. Mainland Chinese stock markets were closed for a holiday.

In commodities, oil futures for Brent crude fell 0.3% to $58.69 a barrel.

The yield on U.S. 10-year Treasurys was slightly lower at 1.625%, from 1.638% Tuesday. Bond yields and prices move in opposite directions.

Looking ahead, investors will eye the ADP National Employment Report for signs of any cracks in the U.S. job market. Plus, Ford Motor Co. will report third-quarter sales.

Write to Max Bernhard at [e-mail]

(END) Dow Jones Newswires

October 02, 2019 06:30 ET (10:30 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.