Global Stocks Weaken as China's Growth Slows
21 January 2019 - 2:00PM
Dow Jones News
By Georgi Kantchev
Global stocks started the week under pressure after data showed
that China's economy grew at its slowest pace in nearly three
decades last year, the latest sign that the world economy is
decelerating.
The Stoxx Europe 600 fell 0.3%,dragged down by the utility and
financial sectors. Asian markets trimmed gains after the Chinese
data release, finishing slightly higher on the day.
U.S. markets are closed Monday for Martin Luther King Jr. Day.
Futures for the S&P 500 were down 0.4%.
The world's second-largest economy grew 6.6% in 2018, the
slowest annual pace China has recorded since 1990, official data
showed Monday. The economic downturn, which has been sharper than
Beijing expected, deepened in the last months of 2018, with
fourth-quarter growth rising 6.4% from a year earlier.
The Chinese figures come amid a bruising trade fight with the
U.S. and, coupled with lackluster numbers for America and Europe,
paint a picture of a slowing global economy.
Worries about growth hit market sentiment late last year, though
stocks recovered some ground early in 2019 due to progress in the
trade negotiations and reassurances by the Federal Reserve that it
would adjust its pace of tightening monetary policy if the data
worsens.
"The global economy and global trade are clearly slowing and
that is dampening sentiment," said Richard McGuire, head of rates
strategy at Rabobank.
"Investors are trying to get a clearer picture through all the
headline noise out there, whether it's U.S.-China trade or Brexit.
But overall, the uncertainty has a bearing on the market," Mr.
McGuire said.
Later in the week, European Central Bank President Mario Draghi
is expected to acknowledge the darkening outlook in the eurozone
after the bank's policy meeting Thursday. In comments earlier in
January, Mr. Draghi said recent data had been weaker than expected,
although he argued that the eurozone probably would avoid
recession.
Investors were also looking to U.K. Prime Minister Theresa May's
next move on Brexit after lawmakers last week soundly rejected her
plan to exit from the European Union, putting the process in
jeopardy ahead of a March 29 deadline to leave. Mrs. May is
scheduled to detail her "Plan B" for Brexit to parliament
Monday.
The British pound wavered, recently trading up less than 0.1%
against the U.S. dollar.
"The U.K. Government has made no progress at all in unearthing a
solution to its impasse over the agreement to leave the EU. The
pound may well still have more upside on good than downside on bad
news, but there isn't any good news around," Kit Juckes, strategist
at Société Générale, said in a note to clients.
Earnings were another focus for investors, with fourth-quarter
results for Ford Motor Co. and International Business Machines on
tap later this week.
Slightly more companies than usual have beaten analysts'
earnings estimates so far, providing a source of support for the
market. Around 76% of companies have reported above analyst
expectations, compared with an average beat of 64%, according to
data from Refinitiv. The bar is significantly lower, however, after
steep downgrades to fourth-quarter and 2019 earnings forecasts in
recent weeks.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
January 21, 2019 08:45 ET (13:45 GMT)
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