Global markets parted ways yesterday as investors were more cautious about the chances of success in China-US trade talks, and looked for direction from the ECB.
The overall mood remained wary, with a rally that has characterised the start of the year stuttering due to slower Chinese economic activity, a softer global outlook, Brexit issues and the US government shutdown, which shows no sign of ending soon.
US investors sold shares Tuesday after the Financial Times and CNBC said Washington had rejected Beijing’s offer of preparatory discussions ahead of the next round of high-level negotiations.
Yesterday saw a sliver of respite as Wall Street opened just in the black, the Dow Jones adding 1 per cent while the tech-heavy Nasdaq rose 0.6 per cent.
“We are continuing to see caution in the markets on Wednesday, with reports a day earlier regarding trade talks between the US and China only aiding that,” said Oanda analyst Craig Erlam.
“Reports that preparatory talks between the US and China ahead of a meeting at the end of the month had been cancelled put a slight dampener on the mood... at a time when we’re already seeing some profit taking.”
Although the White House denied the reports, observers said they highlighted how fragile the negotiations were.
Meanwhile, hopes that China and the US were on the right track have helped rally global markets in January following a torrid performance in 2018.
But data showing China’s economy grew at its weakest pace in three decades added to fears it is heading for a hard landing, while Xi Jinping also showed signs of worrying about the effects of a slowdown in a speech to top provincial leaders this week.
Adding to concerns was confirmation that the US plans to seek the extradition from Canada of a top executive with Chinese telecom giant Huawei before the end of January.
Despite the pervading uncertainty, Frankfurt and Paris joined Wall Street in posting small gains in intraday trades, but London was down 0.5 per cent with little immediate sign of Brexit-related gloom lifting.
Oil prices advanced after taking a hit Tuesday on lingering worries about the effect of a slowdown in the global economy, and particularly China, on demand.