Stocks Retreat on Weak China Data, Trump Summit Collapse; US Q4 GDP in Focus
Frankfurt (Feb 28) Global stocks retreated for a third consecutive session Thursday after President Donald Trump said he was unable to reach a denuclearization deal with North Korea and weak manufacturing data from China underscored the stakes of trade negotiations between Washington and Beijing.
Trupm told reporters in Hanoi that North Korean leader Kim Jong Un had pushed for a complete end to U.S. sanctions on Pyongyang, but would not agree to levels of nuclear verification that would warrant such a move from the United States.
"It was about the sanctions basically," Trump told reporters during a question-and-answer session at the Metropole Hotel in the Vietnamese capital. "They wanted the sanctions lifted in their entirety and we couldn't do that ... Sometimes you have to walk, and this was just one of those times."
Markets were further unnerved by data from China that showed manufacturing activity in the world's second-largest economy slipped below the 50 mark that separates growth from contraction for the third consecutive month in February and was pegged at a three-year low of 49.2 by the National Bureau of Statistics.
The weakness followed comments to the House Ways and Means Committee yesterday by chief trade negotiator Robert Lighthizer, who told lawmakers that the issues separating the two countries were "too serious" to be solved only by China purchasing more U.S.-made goods.
"If we can complete this effort - and again I say if ... we might be able to have an agreement that helps us turn the corner in our economic relationship with China," Lighthizer told Senate lawmakers Wednesday.
U.S. equity futures were marked modestly lower in early European trading, with contracts tied to the Dow Jones Industrial Average indicating a 35 point decline and those linked to the S&P 500 suggesting a 5.13 point pullback for the broader benchmark, which has gained around 11.4% so far this year.
Investors will also get their first look at fourth quarter GDP at 8:30 am eastern time, with analysts expecting a growth rate of around 2.3%, the slowest the 2.1% pace recorded over the first three months of 2018.
"As always, these data are subject to endless revision, but our initial view is that the numbers will understate growth at the end of last year," said Ian Shepherdson of Pantheon Economics. "The key issue is the reported plunge in December retail sales, which depressed our GDP growth estimate by a hefty 0.5 percentage points."
"Retail sales account for about 30% of GDP, so a big miss even in just one month of the quarter-we expected a hefty increase in core sales in December-is enough to make a material difference to reported economic growth for the quarter," he added.
European stocks were heavier across the board Thursday, with the Stoxx 600 falling 0.43% in the opening minutes of trading, led by a .05% decline for the trade-sensitive DAX performance index in Germany and a similar percentage decline for the FTSE 100 in Britain.
Anheuser Busch Inbev NV (BUD) shares were a notable market mover in the European session, rising 4.51% in Brussels after the Budweiser and Corona beer maker posted stronger-than-expected fourth quarter earnings and issued a robust profit outlook for 2019.
Asia stocks were also weaker, with the MSCI ex-Japan index falling 0.54% heading into the final hour of trading and Japan's benchmark Nikkei 225 closing 0.6% lower to end the session at 21,385.16 points.
Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was held near a three-week low of 96.04 in overnight trading as safe-haven flows into the yen pushed its value lower, as did the continued moves in the pound, which is now trading near an 8-month high of 1.3292 following a move by the opposition Labour party to back a second referendum -- under certain conditions -- over Britain's decision to leave the European Union.
Global oil prices were also slipping lower in early European trade, largely off the back of China's weak factory data, as markets turned softer despite the bigger-than-expected increase in U.S. stockpiles of 8.6 million barrels reported yesterday by the Energy Information Administration.
Brent crude contracts for April delivery, the global benchmark, were marked 42 cents lower from their Wednesday close and changing hands at $65.97 per barrel by mid-day trading in New York while WTI contracts for the same month were seen 25 cents lower at $56.73 per barrel.
Thestreet
