LONDON: World shares started 2019 on a downbeat note, oil prices and bond yields skidded lower and the Japanese yen strengthened on Wednesday as data from China to France confirmed investors’ fears of a global economic slowdown.
The U.S. S&P500 and Dow Jones index futures were down 1.5 percent and Nasdaq futures fell 2.3 percent, signalling Wall Street would open in the red on the first trading day of the New Year after closing 2018 with the worst annual loss since 2008.
Weak manufacturing-activity surveys across Asia were followed by disappointing numbers in the euro zone, sending MSCI’s index of world shares 0.4 percent lower .MIWD0000PUS.
China in particular was in focus, after factory activity contracted for the first time in over two years. The gloom continued in Europe, where the Purchasing Managers’ Index for the euro zone reached its lowest since February 2016. Future output PMIs were at a six-year low.
The data suggests there will be no respite for equities or commodities after the losses of 2018.
A pan-European share index recovered some earlier losses to stand 0.7 percent lower . The Paris bourse led losses with a 1.5 percent fall, as France’s PMI fell in December for the first time in two years.
“It’s a continuation of the worries over growth. You can see them in the Asian numbers, which all confirm that we have passed peak growth levels,” said Tim Graf, chief macro strategist at State Street Global Advisors.
The knock-on effects from China’s slowdown and global trade tensions were rippling across Asia and Europe, he said.
“I don’t think the trade story goes away, and Europe, being an open economy, is still vulnerable,” Graf said.
Copper, a key gauge of world growth sentiment, fell to 3 1/2-month lows CMCU3, while Brent crude futures fell 1 percent after losing 19.5 percent in 2018 SHHCv1 LCOc1 [O/R].
Commodity-driven currencies also lost ground, led by the Australian dollar. Often used as a proxy for China sentiment, the Aussie fell as much as 0.7 percent to its lowest since February 2016 at $0.70015 AUD=D3.
There were also renewed fears in Europe over the clean-up of Italy’s banks, with trading in shares of Banca Carige suspended. Carige failed last month to win shareholder backing for a share issue that was part of a rescue plan. An index of Italian bank shares fell 2.5 percent. .FTIT8300
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