Losses Across Asian, European and Wall Street Stocks
International stock markets fell on Tuesday with losses first in Asia, then Europe, spreading to Wall Street as it opened later in the day. The catalyst for the negative investor mood was the IMF announcing it has cut its forecast for world global economic growth for 2019. Christine Lagarde, the International Monetary Fund’s chair, told attendees and reporters at the annual World Economic Forum taking place in Davos, Switzerland, that the organization’s analysts now predict global growth of 3.5% over the year. That is down from its previous forecast for 3.7%.
Lagarde explained the cut was due to increasing risk factors of slowing Chinese economic growth and the disruption in Europe expected to result from Brexit. In Asia, China’s CSI 300 index of mainland stocks saw the heaviest loss, down 1.3%. The Hang Seng dropped 0.7% in Hong Kong. In Europe, London’s FTSE 100 lost 1.1%, Germany’s DAX 30 0.8% and the Euro Stoxx 600 0.6%. The S&P 500 opened 0.8% lower after the long weekend that meant Monday was a holiday.
Recently, hopes for a breakthrough in trade talks between the USA and China have improved investor sentiment. However, those hopes are now fading. The most recent development in the standoff came in reports that the USA will now proceed with the extradition of Huawei (SZ:002502) chief financial officer Meng Wanzhou, who is being held in Canada. If that goes ahead it is expected to seriously damage relations between the two countries, something which will almost certainly not work to the advantage of trade talks reaching a positive compromise between the two economic superpowers.
Investors in major equities indices will today have to take positions on how long they expect the negative market sentiment of yesterday to remain, deepen or ease.