Global stocks falter after five days of gains – Financial Times


Friday 21.00 GMT

What you need to know

  • FTSE All-World index and S&P 500 slip marginally
  • Top Chinese economic official to visit Washington
  • Renminbi has best week against dollar since 2005
  • US core inflation figures match forecasts
  • Brent oil slips but holds above $60 a barrel

Overview

A five-session winning streak for global stocks ran out of steam as participants took a more cautious stance ahead of the weekend and the start of the US quarterly earnings season next week.

The US government shutdown drama provided a further reason for wariness.

“Although stock markets have mostly dismissed the shutdown as having little relevance for trading, Federal Reserve chairman Jerome Powell has warned that a prolonged US government shutdown could start taking a toll on the country’s economic growth,” said Fiona Cincotta, senior market analyst at City Index.

However, the underlying mood across stock markets remained broadly positive, given persistent hopes for a breakthrough in the US-China trade dispute and signs that the Fed was prepared to be “patient” with regard to further interest rate rises.

Beijing and Washington held three days of trade talks this week and, while few details emerged, both sides struck a positive tone. Furthermore, Liu He, China’s top economic official, was expected to travel to Washington this month for high-level negotiations.

Meanwhile, a dovish round of Fedspeak this week — plus the minutes of the central bank’s December meeting — played to market expectations for a pause in the US interest rate cycle.

US consumer price inflation data, released on Friday, further underpinned such expectations and gave a lift to Treasury prices.

The “core” CPI, which excludes food and energy, rose 2.2 per cent in the year to December, unchanged from the previous month.

“The continued stability of core inflation could give the Fed more room to pause, as officials assess the impact of the slowdown in global growth and tightening in financial conditions on the domestic economy,” said Andrew Hunter at Capital Economics.

The dovish tone of US policymakers this week briefly pushed the dollar index to a three-month low, in turn helping China’s renminbi to reach its highest point against the US currency since July, despite weak Chinese inflation data fuelling expectations for further stimulus measures.

The euro spent most of the week at the upper end of its recent trading range against the dollar — briefly topping the $1.15 level — even as a series of weak data releases heightened concerns over the outlook for the eurozone economy.

Sterling sprang into life — hitting its highest level since late November against the dollar, and a two-week peak versus the euro — as speculation mounted that the UK would seek to delay its scheduled departure from the EU. MPs are expected to reject a withdrawal deal reached between the EU and UK in a key vote on Tuesday.

Oil prices had a positive week, despite coming off the boil on Friday, with Brent crude climbing back above $60 a barrel.

Equities

The FTSE All World equity index was down slightly in late trade at 312.40, after rising 5.5 per cent over the previous five days.

The US S&P 500 also ended the day with a marginal loss, at 2,596, but recorded a weekly gain of 2.5 per cent. The Dow Jones Industrial Average slipped slightly, while the Nasdaq Composite shed 0.2 per cent.

In Europe, the Xetra Dax fell 0.3 per cent and London’s FTSE 100 shed 0.4 per cent, although the region-wide Stoxx 600 index eked out a 0.1 per cent gain.

In China, the CSI 300 index gained 0.7 per cent and Hong Kong’s Hang Seng index rose 0.6 per cent. Tokyo’s Topix added 0.5 per cent.

Forex and fixed income

China’s currency enjoyed its best week against the dollar in more than a decade. The onshore renminbi advanced more than 1.7 per cent over the five days, its strongest such gain since China ditched its currency peg and moved to a managed floating exchange rate regime in 2005, according to Refinitiv data.

The US dollar index was up 0.2 per cent at 95.69 — after touching 95.03 on Thursday — with the euro down 0.3 per cent at $1.1460 and the greenback 0.1 per cent higher versus the yen at ¥108.53.

Sterling was up 0.7 per cent at $1.2839, off the day’s high of $1.2865. The euro was down 1 per cent against the pound at £0.8924.

In the fixed income arena, the yield on the US 10-year Treasury was 3 basis points lower at 2.70 per cent, with the two-year yield down 2bp at 2.54 per cent.

The German 10-year Bund yield fell 2bp to 0.18 per cent.

Commodities

Oil prices pulled back after a strong week, with Brent crude settling 2 per cent lower on the day at $60.48 a barrel but still up 6 per cent for the five days. US West Texas Intermediate was down 1.7 per cent in late trade at $51.69.

Gold was $1 higher at $1,287 an ounce.

Additional reporting by Edward White in Taipei and Adam Samson in London

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