A global equity rally fuelled by a dramatic surge on Wall Street ran out of steam yesterday, setting US shares up for a weak opening after a fall in Chinese industrial profits offered a reminder of the pressures on the world economy.
Still, world stocks stayed off near two-year lows, lifted by Wednesday's 1,000 point-plus surge on the US Dow Jones index which was triggered partly by the strongest holiday sales in years.
Stocks in Asia and Europe initially took their cue from this rally, pushing the MSCI world index, which tracks shares in 47 countries, 0.4 per cent higher, adding to a 2.3 per cent spike on Wednesday, when the previous session, rising off a 22-month low hit on Christmas Eve.
But the gains halved by 1130 GMT as a pan-European equity index fell 1.1 per cent after a strong open and export-reliant German shares lost two per cent . Equity futures for the Dow Jones index fell 1.5 per cent while Nasdaq and S&P500 appeared set for even weaker openings.
While Japanese and Australian shares rose strongly, markets in mainland China as well as Hong Kong closed 0.4 per cent weaker after data showed earnings at China's industrial firms dropped in November for the first time in nearly three years.
A Reuters report added to the gloom around the world's second-biggest economy, saying the White House was considering barring US firms from buying telecoms equipment from China's Huawei and ZTE.
That overshadowed positive noises from the US government on trade talks with Beijing, its efforts to temper the White House's recent broadsides against the Federal Reserve and a Mastercard Inc report that US holiday shopping sales had risen the most in six years in 2018.
There were also renewed concerns in Italy, where troubled lender Banca Carige was denied a cash call by its largest shareholder, pushing shares down 12.5 per cent.
The concerns over a faltering global economy and signs of a crude oil glut pressured oil prices, sending Brent futures 1.7 per cent lower to $53.5 a barrel and partly reversing Wednesday's eight per cent jump.
That rise was triggered by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreeing to limit output by 1.2 million barrels per day.
US Treasury yields also reversed direction after rising sharply on Wednesday, dropping three basis points to 2.765 per cent.
Another safe-haven, gold, was up 0.4 per cent, remaining just below a peak hit earlier this week.
Investors also bought yen, pushing the dollar 0.4 per cent lower versus the Japanese currency and forcing it to cede some of its one per cent overnight rise. Against a basket of currencies it was down 0.3 per cent.