Global stocks retreated Monday as investors reacted the weakest growth data from China in nearly thirty years and a downgrade to the world's economic forecast from the IMF.
China's National Bureau of Statistics said fourth quarter GDP slowed to 6.4%, taking the full-year advance to 6.4%, down from 6.8% in 2017 and the slowest since 1990. Domestic demand and export growth have both suffered this year as the government moved to crack down on crippling pollution with tighter rules on building and emissions and the ongoing trade war with the United States had a knock-on effect through global supply chains, many of which eminate from the world's biggest exporter.
The International Monetary Fund cut its global economic growth forecast for the second time in three months following the China reading, citing concerns over unresolved trade conflicts between Washington, Brussels and Beijing and slowing activity in Europe.
The Fund sees the world economy growing at 3.5% this year and 3.6% in 2020, clipping 0.2 and 0.1 percentage points respectively from is prior estimate, published as part of its regular World Economic Update in November. The revisions were published on the eve of this year's World Economic Forum, which kicks off in the Swiss resort town of Davos on Tuesday.
That said, pledges late last year to prime the growth pump with $220 billion worth of stimulus and tax cuts, as well as the hint of possible interest rate reductions from the People's Bank of China, has some investors betting on a 2019 turnaround, a view that helped stocks in the region scratch out modest gains in an otherwise thin Monday trading session.
The MSCI Asia ex-Japan index was marked 0.05% higher heading into the close of trading, with the twin China benchmarks in Shanghai and Shenzen rising 0.55%, while Japan's Nikkei 225 booked a 0.26% gain to close the first trading day of the week at 20,719.33 points.
"While China may continue to use its monetary and fiscal tools to offset the damage done by the trade conflict, there's a limit on how much China may loosen policy given the swelling of its debt," said Hussein Sayed, chief market strategist at FXTM. "It seems the only way for China to prevent a hard landing is to reach to a deal with the U.S., and that's what the markets are hoping for."
European stocks, however, reacted with a bit more pessimism to the China data, although sentiment remains clouded by the uncertainty surrounding Britain's chaotic Brexit process, which staggers into yet another week of parliamentary debates this week with a renewed plan from Prime Minister Theresa May later today in London.
The Stoxx 600 index, the region's broadest measure of share prices, was marked 0.29% lower by mid-day trading in Frankfurt, led by slightly larger declines for the export sensitive DAX performance index in Germany and a 0.58% slide for the bank-heavy benchmark in Italy.
Britain's FTSE 100 edged 0.04% lower as the pound held at 1.2871 amid the Brexit uncertainty, with investors eyeing a statement from May later today that will unveil her "plan B" option after her previous withdrawl agreement suffered the largest defeat in British parliamentary history last week.
"The pound has been holding up quite well so far, despite all the theatre in parliament, but this has less to do with what May is achieving and more to do with the efforts of other MPs to take no deal off the table," said Craig Erlam of Singpore-based brokerage Oanda. "This is the currently the greatest risk for the currency."
Global oil markets were also active this morning, with prices rising on data from China that showed a solid run-rate for the nation's refineries last year, equaling around 12.2 million barrels per day, and last week's U.S. rig count from Baker Hughes, which showed the number of domestic installations fall to the lowest level since May 2018.
Brent crude contracts for March delivery, the global benchmark, were marked 27 cents higher from their Friday close in New York and changing hands at $62.97 per barrel while WTI contracts for the same month were marked 26 cents higher at $54.30 per barrel.