Global stock markets slid yesterday on jitters over looming high-level trade talks between China and the United States that outweighed positive corporate earnings.
European stocks were firmly in the red in the mid-afternoon while, at the start of New York business, the DJIA posted losses of more than one per cent.
Global equities started the week “on the back foot”, said Dean Popplewell at Oanda “as capital markets weigh political developments, from Sino-US trade to Brexit, against US corporate earnings, that have to date, surpassed many analysts expectations, and this despite ongoing signs of a global economic slowdown”.
The pound dropped against the dollar ahead of tomorrow’s vote on British Prime Minister Theresa May's revised Brexit deal, with many believing that even if it is kicked out by MPs, Britain will still not leave the European Union without an agreement.
There is a growing sense that Ms May will seek a delay in the country’s March 29 leaving date to give her more time to reach a deal.
Oil prices shed about $1.50, while earlier in Asia, stock markets closed mixed as investors look ahead to a week chock-full of key events.
On the trade front, hopes that a deal can be struck between the world's top two economies helped fuel a rally this month in global equities.
While there have been conflicting reports on the likelihood of an agreement to end the trade war, analysts say it is in the interests of both sides to reach a deal, with China’s economy stuttering and President Donald Trump gearing up for his re-election campaign.
“Although coming to an agreement is still tricky, both sides have little incentive to escalate tensions,” said Tai Hui, chief market strategist for Asia-Pacific at JP Morgan Asset Management.
“Markets will at least expect an extension of the truce in tariff increases beyond early March, while more difficult issues are still being worked on by both sides.”
As well as the Wednesday-Thursday meeting in Washington, dealers also have in their sights the US Federal Reserve’s latest policy meeting, where the central bank’s statement will be pored over for an idea about its interest rate plans.
Also coming up is the release of US jobs and economic growth data, Chinese manufacturing activity results – and a number of big-name earnings, including from Apple, Samsung, Facebook and Alibaba.
Analysts said there was little major reaction to news that Mr Trump had agreed to re-open the government after public services started to buckle in the longest-ever shutdown.
However, the deal that will see 800,000 workers finally get paid will only last a few weeks and does nothing to resolve the row over the president's demand for billions of dollars to pay for a border wall with Mexico.