Global shares inch up, but trade worries linger

Reuters . London | Published: 00:00, Nov 23,2019


A file photo shows traders at work at Northern Trust offices in London, Britain. — Reuters photo

Global stocks inched up on Friday, lifted by China’s renewed offer to work out a trade pact with Washington, but gains were limited by uncertainty over how the 16-month-old trade war plays out and how much it may undermine the world economy.

Such jitters have put MSCI’s index of global shares on course to snap a six-week streak of gains, with lacklustre economic data and rising political risks in the United States and Britain also casting a pall on sentiment.

European shares opened modestly firmer, however, rising off three-week lows touched on Thursday when it seemed that US legislation on Hong Kong would undermine planned trade talks between the world’s two largest economies. The broader Euro STOXX 600 was up 0.77 per cent.

Wall Street futures too were marked slightly firmer after China said it was willing to work with the United States to resolve core trade concerns, and the Wall Street Journal reported China had invited US trade negotiators for a new round of face-to-face talks in Beijing.

But whipsawing hopes over reaching even a ‘phase one’ deal before tariff hikes kick in on December 15 have restrained markets.

‘Markets are being held hostage by news - positive or negative — coming out of the United States or China. Even if the phase one agreement materialises there is no way I would believe that’s the end of the story, it will just move to German cars or Japanese exports,’ said Marie Owens-Thomsen, chief global economist at wealth manager Indosuez.

Concerns linger, with US president Donald Trump expected to sign into law two bills backing protesters in Hong Kong after the US House of Representatives voted 417-1 for the ‘Hong Kong Human Rights and Democracy Act’, which the Senate had passed unanimously a day earlier.

‘If he’s going to be forced to sign it, then it brings another (element) of uncertainty to this phase one trade deal, which then pushes back into next year,’ said Matt Simpson, senior market analyst at GAIN Capital in Singapore.

But Simpson said that in the absence of major news on trade, range-bound market moves were ‘quite reflective of the small headlines coming through’.

Chinese blue-chip shares closed 0.82 per cent lower and Asian shares ex-Japan firmed 0.3 per cent after the previous day’s steep falls. Yields on US and German government bonds were a shade higher, with 10-year treasury yields inching up to 1.7774 per cent, up from its US close of 1.772 per cent on Thursday.

The failure to resolve the trade spat means the world economy is struggling to recover from its slowdown and the Organisation for Economic Cooperation and Development on Thursday forecast growth at a decade-low 2.9 per cent this year and the next.

That fragility was underscored by weaker than expected data showing eurozone business growth almost ground to a halt this month as activity in the dominant services industry increased at a much weaker pace than expected.

IHS Markit’s flash composite Purchasing Managers’ Index, seen as a reliable guide to economic health, was 50.3, down from October’s 50.6 and moving towards the 50 mark that separates growth from contraction.

In currency markets, the euro dipped into negative territory against the US dollar after the release of the PMI data.

Against a basket of currencies,, the dollar was down less than 0.1 per cent, breaking its three-day streak of gains and heading for its smallest weekly change since the start of August.

Oil prices retreated after hitting two-month highs following a Reuters report that the Organisation of the Petroleum Exporting Countries and its allies are likely to extend existing output cuts until mid-2020. Global benchmark Brent crude was down 0.31 per cent at $63.77 per barrel.

Spot gold edged up 0.2 per cent to $1,467.26 per ounce.

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