Global Stocks Fall After More Weak Economic Data

By Paul J. Davies 

U.S. equities were set for a mixed opening Thursday, as stocks in Europe and several Asian markets slipped following poor economic data from South Korea, one of Asia's biggest exporters.

Futures pointed to a flat opening for the S&P 500 and a 0.3% drop for the Dow Jones Industrial Average.

The U.S. dollar crept up to its highest level in around two years as economic data across the globe has turned weaker and central banks, including the U.S. Federal Reserve and the European Central Bank, have taken a dovish tone. Emerging markets felt the ripples from that rally on Thursday with the Turkish lira, Russian ruble and South African rand all sliding against the dollar.

The WSJ dollar index, which measures the dollar against a basket of currencies, was up 0.2% at 91.21.

Elsewhere, the Stoxx Europe 600 index was down 0.2% and the U.K.'s FTSE 100 dropped 0.3% as investors digested big falls in revenue and profits in the first quarter from major banks UBS and Barclays.

In Asia, the Korean Kospi index was down 0.5% after a fourth-straight month of declining exports dragged on the local economy. South Korean GDP shrank by 0.3% in the first quarter, its worst performance in more than a decade. The result was a sharp drop from 1% growth in the final quarter of 2018 and much worse than expectations of 0.3% growth.

"The biggest quarterly contraction in Korean GDP since the global financial crisis hit in fourth-quarter 2008 has to be bad news," said Robert Carnell, chief economist in Asia at ING. "The components of GDP weakness don't bode well for the quarter ahead. It isn't hard to come up with a set of figures that would deliver a...technical recession."

Stocks in China and Hong Kong were also lower even though the Chinese central bank signaled support for the economy by saying it had no intention of tightening monetary policy. Japan's central bank was also supportive, revising its guidance to say it didn't expect to increase interest rates for at least another year. The Nikkei 225 rose about 0.5%.

Still, the Korean data has added to other weak numbers in recent days, including worse-than-expected Australian inflation data and a disappointing German business-climate survey.

Sweden is another country suffering unexpectedly low inflation, which led its central bank on Thursday to delay its next expected interest-rate rise, meaning it will now likely keep its main rate at minus-0.25% for the rest of this year having previously suggested a rise would come in the second half of 2019.

The Swedish Krona fell sharply against both the dollar and the euro in response and was down more than 1% against both currencies.

The steady drumbeat of signals has encouraged investors to put more money into bonds than equities globally all year, according to strategists at Barclays, lifting prices and pushing down yields.

"Beyond the near-term reflationary effect of rising oil prices, a hawkish shift [toward interest-rate rises] in central banks' rhetoric is likely needed for bond yields to move much higher," they said.

German 10-year bund yields dropped back into negative territory Wednesday and sat at -0.011% Thursday. U.S. 10-year Treasury yields also fell Wednesday, but were marginally higher Thursday at 2.527% from 2.520%. Bond yields and prices move in opposite directions.

In commodities, oil continued to move higher, with Brent crude up 0.8% at $75.19 a barrel. Gold was down 0.1% at $1,277.70 an ounce.

Write to Paul J. Davies at [e-mail]

(END) Dow Jones Newswires

April 25, 2019 08:27 ET (12:27 GMT)

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