Global Stocks Weaken Ahead of New Round of U.S.-China Trade Talks
20 Mars 2019 - 1:32PM
Dow Jones News
By Avantika Chilkoti
U.S. stocks were set to open lower Wednesday as investors
remained cautious ahead of another round of high-level trade talks
between the U.S. and China planned for next week.
Futures pointed to opening drops of less than 0.1% for both the
Dow Jones Industrial Average and the S&P 500.
In Europe, the Stoxx Europe 600 was down 0.4% in morning
trading. Hong Kong's Hang Seng Index was down 0.5% and the Shanghai
Stock Exchange was marginally lower too.
On Tuesday, it emerged that Trade Representative Robert
Lighthizer and Treasury Secretary Steven Mnuchin planned to fly to
Beijing next week, with Chinese negotiators heading to Washington
after that, in what is being framed as a final push to close a
trade deal between the world's two largest economies.
Many analysts attributed the rally in equity markets in 2019 to
high hopes for U.S.-China negotiations. Sentiment around the talks
had dimmed in recent days as reports suggested major issues
remained on the table.
Some analysts, including Liz Ann Sonders, chief investment
strategist at Charles Schwab, have flagged concerns that any new
trade deal might be a "deal light" -- an agreement that allows the
U.S. administration to "take a victory lap" but doesn't tackle
issues such as intellectual-property theft.
"The algorithmic trading has been highly correlated to news on
trade, so if you wanted to point to a fundamental driver of this, a
lot of it is hope for a trade deal," said Ms. Sonders, adding that
markets are already pricing in good news from the talks.
The WSJ Dollar Index, which tracks the greenback against a
basket of 16 currencies, was broadly flat Wednesday. The 10-year
U.S. Treasury edged down to 2.600%, from 2.614% Tuesday. Yields
move inversely to prices.
Later Wednesday, the U.S. central bank will release its economic
forecasts, and Federal Reserve Chairman Jerome Powell's press
conference will be watched for signals on future monetary policy
and the strength of the U.S. economy.
Global markets have been in flux in recent weeks as investors
digested a slew of conflicting economic data from the U.S.,
including disappointing payroll and inflation figures. Many
analysts are questioning how long the U.S. will continue to grow as
the effects of the Trump administration's generous tax policies
wear off.
"At the same time you saw an administration provide all this
fiscal stimulus, they basically offset it by launching a trade
war," Ms. Sonders said. "So we're in uncharted territory in trying
to gauge the impact it's going to have on earnings, the economy, on
animal spirits and confidence."
Meanwhile, in the U.K., many analysts are expecting the Brexit
deadline to be extended beyond the end of March as Prime Minister
Theresa May struggles to craft a deal that is palatable to both
Westminster and Brussels.
Analysts at Rabobank called the situation "out of control" and
warned that markets could have become "complacent" about the
chances that the U.K. could come tumbling out of the block without
an agreement, triggering a selloff in the British pound.
"In the coming days faith amongst traders in an ability of U.K.
[lawmkers] to make rational decisions could fade rapidly and cause
a major selloff," they said in a recent note to clients.
The pound fell 0.3% against the U.S. dollar Wednesday to
$1.3227. The FTSE 100 index, which is dominated by large
international businesses, was broadly flat while the FTSE 250
dropped 0.1%.
In commodities, global oil benchmark Brent crude dropped 0.3% to
$67.44 a barrel.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
March 20, 2019 08:17 ET (12:17 GMT)
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