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Growth worries weigh on world stocks

Wednesday, April 6, 2016 - 06:25

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[NEW YORK] Global stock markets fell Tuesday as anxiety about slowing growth, weak German economic data and a potentially poor earnings season led to heavy selling.

Frankfurt's benchmark DAX 30 index slumped 2.6 per cent as dire German factory orders sparked fresh questions about the health of the eurozone's biggest economy.

France's CAC 40 index shed 2.2 per cent, Britain's FTSE 100 dropped 1.2 per cent in value and the FTSE-Mib in Milan fell 3.0 per cent as Italian banking shares dove.

"A three-week low in the price of oil goes someway to explaining deteriorating market sentiment," said CMC Markets analyst Jasper Lawler.

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The declines also came as International Monetary Fund chief Christine Lagarde said in a speech in Frankfurt that although the global economy wasn't in crisis, the recovery is still "too slow" and "too fragile" in the face of growing risks from a slowdown in China and subdued growth in developing economies.

Lagarde hinted the IMF will cut its current 2016 global growth forecast of 3.4 per cent next week when it publishes a fresh outlook ahead of its spring meeting with the World Bank in Washington.

"Her downbeat comments are probably to soften up markets for downgrades in IMF forecasts next week," said Lawler.

US stocks were in the red the entire session, with many prominent banking and technology shares lower. The S&P 500 ended the day down one per cent.

Analysts are not expecting great things from the US earnings season, which kicks off in earnest next week. Companies in the S&P 500 are expected to see a 4.2 per cent drop in earnings for the first-quarter, according to S&P Capital IQ.

"Investors are in a wait-and-see mode as we prepare for the earnings season to evaluate whether the recovery we've seen from the February lows should be justified or whether stocks have gotten ahead of themselves," said David Levy, portfolio manager at Republic Wealth Advisors.

The benchmark Nikkei index in Tokyo dropped 2.4 per cent as the yen continued to strengthen against the dollar.

"The risk of a strong yen is still there and coupled with overseas factors like falling oil, it's quite hard to become positive," said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

"We're likely to keep trading at these depressed levels." European oil companies were in retreat as crude prices remained under pressure. British-listed BP and Royal Dutch Shell and France's Total all lost about 2.0 per cent.

European carmakers also tumbled. French giants Peugeot and Renault lost 6.5 per cent and 4.9 per cent, respectively, while Germans Daimler and Volkswagen shed 3.5 per cent and 4.0 per cent.

Dublin-based Allergan plummeted 14.8 per cent as the US Treasury announced new rules to discourage mergers between US and foreign businesses designed to sharply lower the US company's tax bill. Dow member Pfizer added 2.1 per cent.

Baker Hughes tumbled 5.1 per cent on reports that the US Justice Department will sue to block its takeover by fellow oil-services giant Halliburton on antitrust grounds. Halliburton advanced 1.2 per cent.

Dow member Disney lost 1.7 per cent after the surprise resignation of chief operating officer Thomas Staggs, who had been the leading candidate to replace chief executive Bob Iger. Topeka Capital Markets called the news "truly stunning" and predicted Iger's contract would be extended to assuage investors.

AFP

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