European stocks bounced around yesterday while New York got off to a slower start following news that the US trade deficit hit a 10-year high in 2018.
The markets were once again warily watching the US-China trade situation, dealers said.
European sentiment had been dampened earlier in the day after the OECD cut its 2019 global economic growth forecast, citing trade tensions and Brexit uncertainty.
In the US, the Commerce Department reported that the nation’s trade deficit with the world jumped 12.5 per cent to $621 billion, as both imports and exports rose to the highest levels ever.
The Dow Jones index was essentially unchanged in early trading.
The data “will fuel the Trump Administration’s fire to correct the trade imbalance with assertive policy actions,” suggested Patrick O'Hare at Briefing.com.
Earlier in Asia, a Shanghai rally led gains among many markets as Chinese investors appeared increasingly optimistic over trade talks with the US.
With expectations that Washington and Beijing will eventually strike a tariffs deal already baked into equity prices, analysts say officials will need to provide some clarity on progress to give markets another step up.
Many in the markets are hoping for a signing ceremony between US President Donald Trump and his Chinese counterpart Xi Jinping later this month.
“A mid-March meeting remains the expected next step, but if trade representatives are unable to agree on the final terms of implementation we could see the trade truce rally fade,” said Oanda analyst Edward Moya.
After a slow start Shanghai closed 1.6 per cent higher to build on Tuesday’s rally, which came on the back of the Chinese government's decision to slash taxes and ramp up spending.
In Europe, yesterday, the Organisation for Economic Co-operation and Development lowered its global economic growth forecast to 3.3 per cent for this year, down from the 3.5 per cent it predicted in November.
“High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown,” the OECD said in an interim version of its Economic Outlook.
The OECD, which groups the world’s top developed economies, revised growth estimates lower for almost all of the countries in the G20 group of industrialised and emerging nations.
Britain’s growth forecast, based on the assumption of a smooth Brexit, was chopped from 1.4 to just 0.8 per cent.