GLOBAL MARKETS-Stocks sink on dismal economic data, mixed trade signals

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GLOBAL MARKETS-Stocks sink on dismal economic data, mixed trade signals

By Ritvik Carvalho

Updated Mon, Sep 23, 2019, 5:55 AM

In This Article:

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* French, German and Euro zone PMIs weaker than expected

* Oil falls below $64

* MSCI All Country World Index down 0.2%

By Ritvik Carvalho

LONDON, Sept 23 (Reuters) - Global shares sank on Monday as weaker-than-expected economic data added to investor worries over the unresolved U.S.-China trade dispute's effects on the world economy.

European stock markets opened lower as surveys of purchasing managers from France, Germany, and the euro zone came in weaker than expected. The pan-European STOXX 600 index was down 0.9%.

The euro fell 0.4% to $1.0966 after the German Purchasing Managers' Index (PMI) release, its lowest in over a week against the dollar.

Germany's DAX index hit its lowest level in nearly two weeks, down 1.35% after the euro zone data, while France's CAC 40 fell nearly 1%.

"Considering that Germany already contracted in Q2, today's numbers effectively increase the risk of another negative quarter in Q3, which by definition would constitute a technical recession," said Marios Hadjikyriacos, investment analyst at XM.

"It seems that the malaise in manufacturing -- owed to trade and Brexit worries -- has started to spread to the much larger services sector as well."

Euro zone business growth has stalled this month, a survey showed on Monday, less than two weeks after outgoing ECB President Mario Draghi pledged indefinite stimulus to revive the bloc's ailing economy.

The recent switch back into support mode by top central banks including the U.S. Federal Reserve, the ECB and China's PBOC has swollen the amount of bonds trading at negative rates to a record of more $17 trillion.

The Bank for International Settlements in its latest report said the growing acceptance of negative interest rates - where investors effectively pay for the privilege of lending - has reached "vaguely troubling" levels.

MSCI's All Country World Index, which tracks shares across 47 countries was down 0.25%.

U.S. stock futures - earlier up 0.4% - fell after the PMI data in Europe. S&P 500 E-mini futures last traded flat.

Protests in Cairo and other major cities against government corruption had forced the suspension of Egypt's main stock market on Sunday and the strains spilled into debt and foreign exchange as major trading centres like London began their week.

In the FX non-deliverable forward (NDF) markets, the Egyptian pound weakened to 18.36 to the U.S. dollar and widened the gap with the more managed spot FX rate, which was at 16.26 pounds.

The government's dollar-denominated bonds fell as much 3 cents in the dollar too.

"We don't think this will be a repeat of the Arab Spring," said Aberdeen Standard Investments' Kevin Daly. But apparently there will be more demonstrations scheduled for Friday so let's see how that pans out."

TRADE CONCERNS

Most Asian share markets slipped as investors waited for more clarity on U.S.- China trade talks.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%.

Over the weekend, the U.S. Trade Representative's office issued a brief statement characterising the two days of talks with China as "productive." It added that a principal-level trade meeting in Washington would take place in October, as previously planned.

China's Commerce Ministry, in a brief statement, described the talks as "constructive", and said they had also had a good discussion on "detailed arrangements" for the high-level talks in October.

Additionally, the United States removed tariffs from more than 400 Chinese products in response to requests from U.S. companies.

Despite the improved tone, markets still remain unconvinced about the possibility of an imminent deal.

Investors were rattled by news on Friday that Chinese officials unexpectedly cancelled a visit to U.S. farms this week following their two days of negotiations in Washington.

In the Middle East, news that five Yemeni civilians were killed in air strikes by the Saudi-led coalition further soured investor appetite.

Oil fell below $64 a barrel, reversing an earlier gain, pressured by the prospect of a faster-than-expected full restart of Saudi Arabian oil output and by fresh signs of European economic weakness.

A source, briefed on the latest developments in the Sept. 14 attack on Saudi oil facilities, told Reuters Saudi Arabia has restored around 75% of crude output lost.

Brent crude futures - the international benchmark for oil - fell 0.2% to $63.98 per barrel.

U.S. crude oil futures fell 0.6% to $57.79 a barrel.

The Pentagon has ordered additional troops to be deployed in the Gulf region to strengthen Saudi Arabia's air and missile defences following an attack on Saudi oil facilities.

Markets will closely watch September manufacturing activity surveys due from the United States later in the day.

In currencies, the dollar gained 0.23% against a basket of currencies. (Reporting by Ritvik Carvalho; additional reporting by Swati Pandey in Sydney and Marc Jones in London; Editing by Catherine Evans and Saumyadeb Chakrabarty)

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