Europe leads fightback after Asian shares are floored again
Gains in Europe helped steady global stock markets yesterday, after rising anxiety about the US-China trade war and further Fed rate hikes gave Asia its longest losing streak since the end of 2015.
A two per cent jump in Italian shares on soothing budget comments had boosted Europe and Wall Street was set to start higher, but it felt fragile after a fresh sell-off in China overnight dragged Asia to a new 14-month low.
Traders were bracing for a potential escalation in the Sino-US row after United States President Donald Trump raised the stakes on Friday.
He said he was ready to impose tariffs on virtually all Chinese imports into the United States, threatening duties on another $267 billion of goods in addition to the $200 billion already facing levies. He called on Apple to make its products in the United States.
Strong US jobs numbers on Friday had bolstered bets on a higher dollar, with expectations the Federal Reserve will keep raising U.S. interest rates.
Europe’s resistance to the gloom was led by the jump in Milan after Economy Minister Giovanni Tria said over the weekend that the country’s upcoming budget would help push down the government’s bond market borrowing costs.
The euro made 0.2 per cent against the dollar at $1.1575 after falling more than half a percent on Friday following the United States jobs data.
Figures on Friday showed traders’ overall dollar positions making their biggest drop in nearly six months. The pullback comes after speculators had boosted net long bets on the greenback to the highest for more than one and a half years, in late August. The most eyecatching action was in Asia again.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9 per cent to the lowest since July 2017, extending losses from last week when it dropped 3.5 per cent for its worst weekly showing since mid-March.
The latest 14-month low for emerging-market shares came amid turbulence in Argentina, Turkey, Brazil, Russia and South Africa, where currencies have been routed recently.
There were other areas of fallout from the global trade worries too. The Australian dollar, a proxy for Chinese growth because of the large volume of metals Australia sells to China, hovered near its lowest in two and a half years and was last at $0.7115. Copper, which China hoovers up ferociously, tumbled 1.2 per cent, after seeing a 20 per cent drop already this year.
Gold was lower at $1,193.01 but oil prices bucked the trend, climbing after three straight days of losses as data showed US drilling stalling and with US sanctions against Iran’s crude exports looming in November.
US crude futures were up 44 cents at $68.20 per barrel and Brent crude futures added 52 cents to $77.35 a barrel.