Stock selloff snowballs as investors price in slowing world economy
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Stock selloff snowballs as investors price in slowing world economy

Losses on global stocks snowballed yesterday, with Wall Street set to follow Europe and Asia lower as fresh signs emerged that the US-China trade spat was taking a deeper toll on world economic growth.

Data from the world’s biggest economies – the United States, China, Japan and Germany – have all disappointed investors in recent days, and doubts are growing that Washington and Beijing will reach agreement before a 90-day trade ceasefire expires.

Markets were also on edge following news that the British parliament’s crucial vote on Prime Minister Theresa May’s Brexit deal will be delayed, sending sterling and UK stocks lower.

MSCI’s all-country index has spent four weeks in the red, despite intermittent rallies fuelled by hopes of trade war detente.

The index slipped 0.5 per cent, while a pan-European index fell 0.7 per cent by mid-session. US equity futures were down 0.3 per cent, suggesting more pressure on Wall Street.

Last week’s arrest of the chief financial officer of Chinese smartphone maker Huawei for extradition to the United States was seen as putting up another hurdle to the resolution of a trade war between the world’s two biggest economies.

Investors keeping their eyes on Britain, France

US trade representative Robert Lighthizer said Sunday there was a “hard deadline” to the 90-day trade ceasefire and without a successful end to talks by March 1, Washington would impose new tariffs on Chinese goods.

Following weak trade and inflation data on the weekend, China also posted far weaker-than-expected November exports and imports, reinforcing expectations Beijing will roll out more stimulus to prevent the economy cooling too fast.

However, the yuan sagged to a one-week low after the weak data.

Japan posted the worst contraction in over four years in the third quarter as uncertainty over global demand and trade saw companies slashing capital spending.

MSCI’s index of Asian equities outside Japan earlier slid to near three-week lows, Shanghai shares retreated 0.8 per cent and Japan’s Nikkei shed 2.1 per cent. Emerging-market stocks lost 1.5 per cent.

European investors were keeping their eyes on events in Britain and France. Sterling yesterday slumped to the lowest since June 2017 versus the dollar..

Sterling slid half a per cent to $1.2656 and extended losses versus the euro, trading down 0.7 per cent at 90.18 pence – its weakest since early-September.

Britain’s FTSE 250 equity index, sensitive to local economic developments tumbled 1 per cent and investors scurried to buy British government bonds, with yields dropping five to seven basis points on the day.

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