Global equity markets slumped to a three-month low yesterday after disappointing Chinese trade data renewed concerns about the world’s second-largest economy, but rebounding oil prices and the dollar’s market role led US stocks to pare losses.
Stocks on Wall Street fell almost one per cent and in Europe a bit more at their lows, following data that showed Chinese imports in dollar terms had contracted and exports dropped by a sharper-than-expected 10 per cent.
The unexpected trade figures pointed to weaker Chinese demand both at home and aboard while deepening concerns over the latest depreciation in China’s yuan currency, which hit a fresh six-year low against a firming US dollar.
Oil prices rebounded after an initial bearish reading from a US Energy Information Administration report soon focused on sharp inventory draw-downs in distillates, including diesel and heating oil, and a decline for gasoline.
The reversal in oil prices helped turn markets that have traded inversely to the dollar. In recent weeks that dollar has strengthened on growing expectations of a Fed rate hike, which had weakened stocks, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
The Dow Jones industrial average fell 38.48 points, or 0.21 per cent, to 18,105.72. The S&P 500 slid 4.85 points, or 0.23 per cent, to 2,134.33 and the Nasdaq Composite lost 19.10 points, or 0.36 per cent, to 5,219.92.
In Europe, the FTSEurofirst 300 index of leading regional shares closed down 0.91 per cent to 1,323.95. MSCI’s all-country world stock index of equity markets in 46 countries fell to lows last seen on July 12 before paring some losses to trade 0.34 per cent lower.
In London, mining stocks BHP Billiton and Rio Tinto fell 4.4 per cent and 4.9 per cent, respectively, due to the trade data from China, the world’s biggest metals consumer.
The dollar tumbled from a seven-month high as risk appetite took a turn for the worse on the soft Chinese data, which rattled markets that expect the Fed to boost rates by year-end.
The US currency also fell from a more than two-month high against the yen and Swiss franc, two safe-haven currencies that benefit in times of political or financial stress.
The dollar was last down 0.59 per cent against the yen at 103.57 yen. The euro fell briefly below $1.10 for the first time since July, but quickly recovered to trade 0.39 per cent higher on the day at $1.1049.
Oil prices initially fell more than one per cent after US government data reported the first domestic crude inventory growth in six weeks, a build above market expectations.
Brent crude rose 22 cents to settle higher at $52.03 per barrel, while US West Texas Intermediate crude rose 26 cents to settle at $50.44.
Europe’s benchmark government bond yield retreated from one-month highs after the latest signals from the world’s central banks soothed fears that monetary stimulus could be petering out.