European and Asian stocks dropped on Wednesday following the rout on Wall Street, though declines were contained and U.S. equity futures rose after China pledged to start delivering on trade agreements reached with America. The pound gained as traders weighed the latest on Brexit.
Global markets were left reeling following Tuesday’s steep sell-off in New York, but nerves appeared to steady after China’s Commerce Ministry said Beijing will start to quickly implement specific items where there’s consensus with the U.S. and will push forward on trade negotiations within the 90-day “timetable and road map.” While the Stoxx Europe 600 Index slumped 1.2 per cent, that was far less than the 3.2 per cent plunge recorded by the S&P 500 a day earlier. Futures for America’s benchmark gauge advanced, though the U.S. market is closed on Wednesday to mark the death of President George H. W. Bush.
In Canada, the S&P/TSX Composite closed up 119.05 points at 15,182.64.
Stocks fell in Japan, Korea, Australia and Hong Kong, and China’s yuan gave up some of its recent surge. The pound edged higher as investors digested legal advice over Prime Minister Theresa May’s Brexit deal, which confirmed that the so-called customs backstop -- the insurance mechanism that kicks in if the Irish border issue cannot be resolved -- could remain “ indefinitely.” Benchmark German bunds rose before reversing, while Italian bonds jumped on mounting optimism for a positive end to the country’s budget spat with the EU.
The break in trading in the U.S. offers respite to investors after a roller coaster few days, and a chance to reassess what might be behind the latest bout of selling. From the trade war to flattening Treasury yield curve there’s no shortage of culprits, but the underlying narrative appears to be mounting concern that the global growth picture is not as robust as it seems.
China’s announcement, another twist in the trade war saga, was a dose of positive news. It ended days of silence from the Asian nation following a weekend meeting between Presidents Donald Trump and Xi Jinping. Upbeat statements from Trump had not been immediately matched by Beijing, helping fuel the equity tumult.
Elsewhere, Australia’s dollar slid after weaker-than-anticipated economic growth for the third quarter. West Texas oil prices were little changed around US$53 a barrel as traders await this week’s critical OPEC gathering. Bitcoin extends losses, dropping as much as 5.9 per cent.
Here are the main moves in markets:
Stocks
Futures on the S&P 500 Index gained 0.6 per cent. The Stoxx Europe 600 Index sank 1.2 per cent to the lowest in more than a week on the biggest tumble in six weeks. The U.K.’s FTSE 100 Index sank 1.4 per cent to the lowest in more than eight months on the largest tumble in almost eight weeks. Germany’s DAX Index decreased 1.2 per cent to the lowest in more than a week on the biggest dip in more than two weeks. The MSCI Asia Pacific Index decreased 1.1 per cent to the lowest in a week on the largest dip in more than two weeks. The MSCI Emerging Market Index decreased 1.3 per cent, the biggest dip in more than two weeks.
Currencies
The Bloomberg Dollar Spot Index rose 0.2 per cent to the highest in more than a week. The euro gained 0.1 per cent to US$1.1352. The British pound climbed 0.01 per cent to US$1.2730, the first advance in a week. The Japanese yen declined 0.3 per cent to 113.13 per dollar, the biggest drop in more than a week.
Bonds
Germany’s 10-year yield gained one basis point to 0.28 per cent, the first advance in a week and the biggest rise in more than a week. Britain’s 10-year yield jumped three basis points to 1.316 per cent, the first advance in more than a week and the largest surge in almost three weeks. The spread of Italy’s 10-year bonds over Germany’s decreased 11 basis points to 2.7832 per centage points to the smallest premium in almost 10 weeks.
Commodities
West Texas Intermediate crude was little changed at US$53.11 a barrel, after reaching the highest in two weeks. Gold was little changed at US$1,238 an ounce.
- with files from BNN Bloomberg
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