The Friday Market Minute
- Global stocks retreat for a third session amid concerns over world economic growth and news that U.S. China trade talks may not reach a consensus before their March 2 deadline.
- President Donald Trump tells reporters he won't be meeting with China leader Xi Jinping this month, casting doubt on trade talk progress ahead of key meetings next week in Beijing.
- European stocks dip following sharp cuts in GDP growth forecasts and ongoing uncertainty over Britain's Brexit plans.
- Oil prices slide amid reports that Saudi Arabia cut its January production by 400,000 barrels per day as OPEC's biggest member paced the cartel's latest output cuts.
- U.S. equity futures suggest a 110 point pullback on Wall Street ahead of earnings from Arconic, Hasbro and Phillips 66.
Global stocks retreated for a third consecutive session Friday as investors reacted to sharp cuts in growth forecasts for key economies in Europe and grew increasingly concerned that President Donald Trump's decision not to meet with China leader Xi Jinping before their self-imposed deadline for trade talks signals a lack of progress in the months-long negotiations.
Trump told reporters in the White House yesterday that he has no plans to meeting Xi between now and March 2, when his administration has vowed to increase tariffs on $200 billion worth of China made goods from 10% to 25% if a trade deal isn't in place. His brief answers suggested talks, which resume next week in Beijing with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, remain stuck on key issues such as China's broader market reforms and intellectual property protections.
The late-session declines on Wall Street that followed those comments flowed through into the overnight session, although with many markets closed for the final day of Lunar New Year celebrations, the impact around the broader Asia region was muted, with the MSCI ex-Japan index slipping 0.48% heading into the final hours of trading. Japan's Nikkei 225, however, slumped 1.06% to close at 20,333.17 to extend its five-day decline to 2.4%.
U.S. stocks are likely to follow suit, based on early indications from equity futures prices, with contracts tied to the Dow Jones Industrial Average I:DJI suggesting a 100 point decline for the 30-stock average while those linked to the S&P 500 undefined are guiding to an 11.2 point pullback for the broader benchmark in a light session for U.S. corporate earnings.
The overnight caution on trade was matched by concerns for the fate of global economic growth, which was dealt a twin blow yesterday by significant markdowns in GDP forecasts from both the European Commission and the Bank of England, both of which cited trade and political tensions both at home and abroad.
The U.S dollar benefited from the defensive stance investors adopted on the back of both reports, rising 0.1% against a basket of six global currencies to trade at 96.57, near the highest level since early January. Benchmark government bond yields were also under pressure as investors piled cash into safe-haven assets, pushing 10-year Treasury notes to 2.65% and similarly-dated German bunds to a two-year low of 0.105%.
European stocks opened weaker across the board Friday, with the Stoxx 600 benchmark falling 0.1% in the opening minutes of trading while indices around the region flitted in-and-out of positive territory.
The pound was marked modestly lower at 1.2940 against the U.S. dollar following a meeting in Brussels between European Commission President Jean-Claude Junkcer and U.K. Prime Minister Theresa May yesterday that failed to break the deadlock on Breixt talks that hinges on the Irish border issue, although the pair pledged to meet again before the end of the month.
Global oil prices retreated alongside risk assets around the world, with investors citing both concerns over world economic growth and its impact on end demand, as well as a report from Reuters that suggested Saudi Arabia's January crude output fell by 400,000 barrels per day as OPEC's largest member paced the cartel's production cuts.
Brent crude contracts for April delivery, the global benchmark, were marked 48 cents lower from their Thursday close in New York and changing hands at $61.17 per barrel while WTI contracts for March were seen 50 cents lower at $52.14 per barrel, extending their February decline to around 5.65%.