U.S. Stocks Open Lower as Economic Concerns Resurface
22 Janvier 2019 - 04:02PM
Dow Jones News
By Avantika Chilkoti
U.S. stocks opened lower Tuesday as concerns over global growth
resurfaced, leaving investors questioning whether the strong start
to 2019 was simply a fleeting moment of optimism.
The S&P 500 and the Dow Jones Industrial Average both fell
about 0.5% in the opening minutes of trading, following Monday's
holiday for Martin Luther King Jr. Day.
That follows a broader downturn in global markets. The Stoxx
Europe 600 was 0.3% lower, weighed down by bank and mining stocks,
with all of the regional indexes lower. Most Asian markets also
fell, with China's Shanghai Composite down 1.2%, Japan's Nikkei
0.5% lower and Hong Kong's Hang Seng Index losing 0.7%.
Concerns around global growth have weighed on equity markets
this week. The International Monetary Fund reduced its forecast for
global economic growth in 2019 to 3.5% from a 3.7% estimate posted
in October. Meanwhile, official data published Monday showed the
Chinese economy grew 6.6% in 2018, the slowest annual pace since
1990.
Anna Stupnytska, global economist at Fidelity International,
said the slowdown in China is a positive signal for the world's
second-largest economy and suggests Beijing isn't using
"unproductive" big-bang stimulus measures.
"It's good for the long-term sustainable story and something
investors should be happy about," she said. "But it's not good for
markets and it's not good for the rest of the world because the
supply chains, the links to other countries, are way too important
to ignore."
The WSJ Dollar Index, which tracks the dollar against a basket
of 16 currencies, was broadly flat.
Equity markets opened the year with a rally. The Stoxx Europe
600 is still up 5.3% this year and the S&P 500 up 6.5%, after a
sharp drop in the final quarter of 2018 when U.S.-China trade
tensions and the government shutdown left investors questioning
whether the U.S. economy would sustain its strong growth for much
longer.
Many analysts see no justification for an upturn in equity
markets this year.
"What has changed is very little," said Ugo Lancioni, head of
the currency business at Neuberger Berman, though he also noted
there has been a marked shift in market expectations for U.S.
interest rates in the coming months.
In recent weeks, Federal Reserve Chairman Jerome Powell has
repeatedly reassured investors the central bank will be "patient"
and "flexible" in its plans to raise rates in the world's largest
economy.
"Coupled with better data in the States, what has helped is the
Fed turning a little more cautious," Mr. Lancioni added.
The 10-year U.S. Treasury yield dipped to 2.755%, from 2.783% on
Friday. Yields move inversely to prices.
Investors will be watching closely for comments from Mario
Draghi, president of the European Central Bank, at a meeting later
this week.
Rabobank sees no reason for the ECB to change plans to hold
policy through the summer, adding that any decisions will depend on
fresh data about the health of the global economy.
"For practical reasons, the ECB would likely still wish to raise
rates from their exceptionally low levels, but the risks
surrounding this have clearly increased," analysts at Rabobank said
in a recent note to clients.
Earlier this month, weeks after the ECB moved to roll back its
EUR2.5 trillion ($2.8 trillion) bond-buying program, Mr. Draghi
pointed out that external factors including the slowdown in China
had triggered an unexpected weakening in the eurozone economy.
The pound was up 0.1% against the dollar after the Office for
National Statistics posted better-than-expected earnings data, even
as Brexit negotiations drag on.
In commodities, global benchmark Brent crude oil was down 1.7%
to $61.67 a barrel.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
January 22, 2019 09:47 ET (14:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.