World shares track Wall Street losses on weak US factory data

Elaine Kurtenbach

BANGKOK (AP) – Shares fell in Europe and Asia yesterday after a disappointing update on American manufacturing pulled United States (US) stocks sharply lower.

Germany’s DAX declined 1.1 per cent to 12,132.11 while the CAC 40 in Paris shed 1.2 per cent to 5,528.67 and Britain’s FTSE 100 sank 1.3 per cent to 7,263.95. New York looked set to extend losses, with the future contract for the S&P 500 down 0.4 per cent to 2,927.00. The Dow future was down 0.3 per cent at 26,431.00.

With the date set for Britain’s departure from the European Union (EU) less than a month away, Prime Minister Boris Johnson said he would submit what he said is the United Kingdom’s (UK) “final offer” for a Brexit deal.

Johnson said the proposal is a “fair and reasonable compromise”, but it is likely to face deep skepticism from EU leaders, who doubt the UK has a workable plan to avoid checks on goods or people crossing the border between EU member Ireland and the UK’s Northern Ireland after Brexit.

The broader concern weighing on the markets was a US report showed that manufacturing weakened in September for the second straight month as US President Donald Trump’s trade war with China dragged on confidence and factory activity.

It dashed economists’ belief that August’s contraction was an aberration, and stocks and bond yields immediately reversed course to drop sharply lower following the report.

The pain was shared in Asia, where Japan’s Nikkei 225 index shed 0.5 per cent to 21,778.61 while the Hang Seng in Hong Kong lost 0.2 per cent to 26,042.69. Sydney’s S&P ASX 200 gave up 1.5 per cent to 6,639.90.

Markets in mainland China were closed for National Day holidays. They reopen on October 8. India’s markets area was also closed.

The Kospi in South Korea sank two per cent to 2,031.91 after North Korea fired a ballistic missile toward the sea, according to South Korea’s military. The display of Pyongyang’s expanding military capabilities came just hours after it said it would resume nuclear diplomacy with the US this weekend.

Papa John’s President & CEO Rob Lynch outside the Nasdaq MarketSite, after ringing the opening bell, in New York. PHOTO: AP

Not all manufacturing data was so gloomy, said Jeffrey Halley of Oanda.

“The UK, core Latam and emerging Asia seem to be holding their own, and it is far too soon to say that the US is about to wither on the vine,” he said.

“If they are doing so in such a toxic global trade environment, then imagine how they may perform if we get a trade breakthrough in the coming weeks. It’s not all doom and gloom in the Markits,” Halley said in a commentary.

Overnight, the S&P 500 slumped 1.2 per cent to 2,940.25 for its sharpest loss since August. The Dow Jones Industrial Average fell 1.3 per cent to 26,573.04, and the Nasdaq composite dropped 1.1 per cent to 7,908.68.

Small-company stocks fell more than the rest of the market. The Russell 2000 index lost two per cent, to 1,493.43.

In the bond market, the yield on the 10-year Treasury dropped to 1.65 per cent from 1.74 per cent before the report’s release, which is a big move. Three stocks fell for every one that rose on the New York Stock Exchange, and gold climbed as investors sought safer ground.

Manufacturing is a relatively small part of the US economy, but investors the doldrums might spill into other areas. That puts an even bigger spotlight on a jobs report due out tomorrow, which economists expect to show an acceleration in hiring.

“Granted, manufacturing equates to a mere 11 per cent of US GDP, but the market … is incredibly sensitive to the outcome,” Chris Weston of Pepperstone said in a report.

The protracted trade war with China is hammering export manufacturing. It also raises uncertainties over the future rules of international trade, causing CEOs to curb spending.

In energy trading, benchmark crude oil rebounded, gaining 47 cents to USD54.09 per barrel in electronic trading on the New York Mercantile Exchange. It fell 45 cents to USD53.62 a barrel on Tuesday. Brent crude oil, the international standard, picked up 23 cents to USD59.12 per barrel.

The dollar slipped to 107.71 Japanese yen from 107.73 yen on Tuesday. The euro dropped to USD1.0914.