Global markets: China worries slam stocks, rising supply hits oil

By Herbert Lash NEW YORK (Reuters) - Global stock markets tumbled on Monday after Caterpillar and Nvidia Corp warned of weak Chinese demand while oil posted its biggest one-day drop in a month on expectations of growing U.S. crude supply.

Reuters January 29, 2019 06:05:49 IST
Global markets: China worries slam stocks, rising supply hits oil

Global markets China worries slam stocks rising supply hits oil

By Herbert Lash

NEW YORK (Reuters) - Global stock markets tumbled on Monday after Caterpillar and Nvidia Corp warned of weak Chinese demand while oil posted its biggest one-day drop in a month on expectations of growing U.S. crude supply.

Equities also were slammed by plunging shares of Brazilian miner Vale SA, which lost some $19.3 billion of its market value following the collapse of a tailing dam last week that killed at least 60 people.

Vale shares dropped 24.5 percent in Sao Paulo trade.

The dollar fell against a basket of currencies as traders awaited the Federal Reserve's two-day policy meeting ending Wednesday and the results of U.S.-China trade talks this week.

The euro reached a 10-day high against the dollar ahead of voting in Britain's parliament on Tuesday that aims to break the Brexit deadlock.

Caterpillar, a bellwether for global industrials, fell 9.1 percent as its quarterly profit missed Wall Street estimates, hurt by softening Chinese demand, a strong dollar and higher manufacturing and freight costs.

It was Caterpillar's worst single-day drop since August 2011.

Nvidia slid 13.8 percent after the chipmaker cut its fourth-quarter revenue estimate by half a billion dollars, hit by weak demand for its gaming chips in China and lower-than-expected data center sales.

Apple's downward guidance two weeks ago, along with the announcements by Caterpillar and Nvidia, suggest the U.S.-China trade war will affect more companies, said Kristina Hooper, chief global market strategist at Invesco.

"I view this as a cause for concern. It's not a crisis, but it's likely to be a few more canaries in the coal mine because there is going to be a significant cohort of stocks that are likely to be impacted by the U.S.-China trade war," Hooper said.

Earnings at Chinese industrial firms shrank for a second straight month in December, hit by slowing prices and weak factory activity.

The FTSEurofirst 300 index of leading regional shares closed down 0.96 percent while MSCI's all-country world equity index declined 0.62 percent.

Stocks on Wall Street, down more than 1 percent for most of the session, recouped some losses at the close.

The Dow Jones Industrial Average fell 208.98 points, or 0.84 percent, to 24,528.22. The S&P 500 lost 20.91 points, or 0.78 percent, to 2,643.85 and the Nasdaq Composite dropped 79.18 points, or 1.11 percent, to 7,085.69.

Emerging market stocks lost 0.39 percent.

Volatility has picked up as investors fret about an economic cycle that is long in the tooth, leading to sharp reactions in the market to news, said Laura Kane, head of investment themes for the Americas at UBS Wealth Management.

Equity markets have solid underpinnings with fourth-quarter earnings looking good, a likely truce in the U.S.-China trade talks and the Fed sounding a dovish message, leading her to be optimistic, Kane said.

"But the complication of volatility being uncomfortable and the fact we're later in the (business) cycle, that's why we're seeing these larger reactions to market news than we're used to," she said.

U.S. energy companies last week boosted the number of rigs drilling for oil for the first time since late December.

U.S. crude production, which rose to a record 11.9 million barrels per day late last year, has undermined sentiment in the oil market, traders said.

Also weighing on oil prices are concerns about whether Chinese refiners will continue to import crude at 2018's breakneck pace.

U.S. crude settled down 3.17 percent at $51.99 per barrel and Brent fell 2.77 percent to settle at $59.93.

In FX markets, the ICE index that tracks the dollar versus the euro, yen, sterling and three other currencies was down 0.05 percent at 95.745. It hit a near two-week low at 95.673 earlier in the session.

The euro rose 0.11 percent to $1.1425 while the Japanese yen strengthened 0.16 percent versus the greenback at 109.36 per dollar.

Benchmark 10-year U.S. Treasury notes rose 1/32 in price to push their yield down to 2.7458 percent.

U.S. gold futures settled up 0.4 percent at $1,303.10 per ounce.

(Reporting by Herbert Lash; Additional reporting by Sruthi Shankar in Bengaluru; Editing by Dan Grebler and Sonya Hepinstall)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.