REUTERS/Adrees Latif JSK
- A global sell-off in stocks took place Friday morning following a rash of bad data across two continents.
- The Shanghai Composite Index was down 4.4% after China’s biggest brokerage issued a sell rating on a major state-owned company and new data showed that Chinese exports dropped in February.
- Chinese exports fell 21% last month — partially driven by the US-China trade war.
- European equities were trading downward as well after the European Central Bank cut its growth forecast to 1.1% and announced stimulus measures, signaling an economic slowdown.
- German factory orders declined even though analysts were expecting them to go up.
- US futures were down ahead of Friday’s jobs report.
Chinese stocks fell by their most in nearly five months after the nation’s biggest brokerage issued a rare sell rating on the People’s Insurance Company (Group) of China, most likely signaling the government’s desire to slow a market that has outperformed global rivals over the past two months. New data showing a 21% decline in Chinese exports in February — partially driven by the US-China trade war — didn’t help matters.
Citic Securities Co. told clients that the company was “significantly overvalued” and that its stock could decline more than 50%, according to Bloomberg.
Yahoo Finance
The bad news from China appeared to be helping a global sell-off in stocks. Growth in China has actually been slowing for a while, and at the same time Europe is flirting with recession.
“Factory orders in Germany fell by 2.6% month-to-month in January, well below the consensus for a 0.5% increase. The year-over-year rate increased marginally to -3.9%,” according to Claus Vistesen of Pantheon Macroeconomics.
Pantheon Macroeconomics
“German industrial orders fell by their steepest amount in seven months in January,” Russ Mould, an investment director at AJ Bell, told clients in his morning email. “It is understandable why investors have been so worried about the outlook for global growth when you see figures like these.”
- European equities trended downward Friday morning after the European Central Bank on Thursday cut its eurozone growth forecast for 2019 to 1.1%, down from 1.7% three months ago. The ECB’s president, Mario Draghi, also announced interest rates would be held steady for the rest of this year and promised a tranche of cheap long-term loans for banks in September.
- US futures dipped ahead of the Friday release of the monthly US jobs report. Earlier this week, news emerged that the US trade deficit widened to a 10-year high in 2018 despite President Donald Trump’s efforts to narrow it.
“Chinese and Asian stocks were whacked and, combined with the ECB’s pessimistic outlook, the picture today looks decidedly risk-off,” said Neil Wilson, the chief marketing analyst at Markets.com.
These factors “are beginning to come together to paint a more dismal outlook for global growth,” Lindsey Piegza, the chief economist at Stifel Nicolaus & Co., told Bloomberg TV.
Here’s a roundup of the damage as of 9:02 a.m. in London (4:02 a.m. ET):
- The Shanghai Composite Index fell 4.4%, Hong Kong’s Hang Seng index was down almost 2%, and the Nikkei 225 was down 2%.
- The Euro Stoxx 50, the DAX, and the FTSE 100 were all down by more than 0.5%.
- US futures signaled a decline of 0.8% to 1.2% for the Dow, the S&P 500, and the Nasdaq.
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