GLOBAL MARKETS-Stocks extend retreat as global growth worries clobber investors

by Reuters
Monday, 10 December 2018 01:28 GMT

* MSCI Asia-Pacific index down 0.7 pct, Nikkei sheds 2 pct

* Graphic: World FX rates in 2018

By Shinichi Saoshiro

TOKYO, Dec 10 (Reuters) - Global stocks extended their slump on Monday, with U.S. equity futures and Asian shares sliding on worries over slowing growth and fears that a fresh flare-up in tensions between Washington and Beijing could quash any chances of a trade deal.

Traders returned from the weekend to face a growing wall of worry, with the world's largest economies -- the United States, China and Japan -- all reporting weaker-than-expected data which point to moderating activity.

S&P futures were down 0.7 percent and the Dow futures lost 0.8 percent early in the Asian day.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.7 percent, stooping to a two-week low.

Australian stocks fell 1.7 percent, brushing its lowest level since December 2016, and South Korea's KOSPI were down 1.4 percent.

Japan's Nikkei shed 2 percent. Data early in the session showed the economy contracted the most in over four years in the third quarter as capital expenditure tumbled.

White House trade adviser Peter Navarro's comments that U.S. officials would raise tariff rates on Chinese imports if the two countries could not come to an agreement during a 90-day negotiating period fanned fresh concerns over U.S.-China trade relations.

Markets were already reeling on news last week that Canadian officials had arrested the chief financial officer of Chinese smartphone maker Huawei for extradition to the United States. The arrest was seen as an added threat to the resolution of a trade war between the world's top two economies.

Wall Street's main indexes fell more than 2 percent on Friday in a broad sell-off, posting their largest weekly percentage drops since March.

"The biggest concerns for equity markets currently is the U.S.-China trade conflict and the Huawei incident," said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.

"The trade theme will preoccupy the markets through the 90-day truce period between the United States and China, waiting for any signs of concession between the parties."

Trump and Chinese President Xi Jinping have agreed to a truce that delayed the planned Jan. 1 U.S. hike of tariffs to 25 percent from 10 percent on $200 billion of Chinese goods while they negotiate a trade deal.

U.S.-China trade negotiations need to reach a successful end by March 1 or new tariffs will be imposed, U.S. Trade Representative Robert Lighthizer said on Sunday.

The dollar was on the backfoot after Friday's soft U.S. jobs report raised worries that economic growth is moderating and the Federal Reserve may pause its tightening cycle sooner than previously thought.

The British pound also was on the defensive as Prime Minister Theresa May's deal to exit the European Union looks set to be rejected by parliament on Tuesday, while the Chinese yuan dipped in offshore trade following weak trade and inflation data over the weekend.

Earlier Friday, the U.S. Labor Department said public and private employers hired 155,000 workers in November, fewer than the 200,000 forecast by economists polled by Reuters, while the jobless rate held at a 49-year low of 3.7 percent.

The dollar was down 0.2 percent at 112.50 yen and the euro added 0.25 percent to $1.1409.

Other data at the weekend showed China reporting far weaker than expected November exports and imports, underscoring slower global and domestic demand and reinforcing views that Chinese authorities will have to roll out more support and stimulus soon to keep the economy from cooling too much.

Oil prices rose, extending gains from Friday when producer club OPEC and some non-affiliated producers agreed a supply cut of 1.2 million barrels per day (bpd) from January.

Brent crude edged up 0.2 percent to $61.79 per barrel. (Editing by Shri Navaratnam and Kim Coghill)

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