Global shares have steadied, struggling to draw momentum from a rally on Wall Street as concerns about faltering economic growth dampened investor sentiment, which also dented the oil price.
Data from China on Tuesday showed exports grew at their fastest since March 2023 in August, suggesting manufacturers were rushing out orders before tariffs expected from a number of trade partners, while imports missed forecasts amid weak domestic demand.
That followed Monday’s inflation figures that pointed to still-fragile domestic demand as producer price deflation worsened, keeping alive calls for further stimulus from Beijing to shore up its economy.
This took a chunk out of Asian shares, as well as commodities such as copper and crude.
Across the broader equity market, MSCI’s All-World index was flat, reflecting modest gains in Europe, where the STOXX 600 was up 0.2 per cent and as US stock futures traded either side of unchanged.
Investors are anticipating a series of rapid interest rate cuts from the Federal Reserve in the coming months after last week’s US jobs report painted a picture of a labour market that was slowing.
“Markets are now on hard-landing alert essentially and we’ve seen a return to ‘good news is good news’,” Investec chief economist Philip Shaw said.
Stocks had traded at record highs just two weeks ago, as expectations built for the Fed to deliver some fresh stimulus to the economy by cutting borrowing costs.
But with the all-important labour market slowing, activity across the manufacturing sector in contraction and inflation subsiding, the mood has shifted.
Futures show traders are banking on US rates dropping by a full percentage point by the end of 2024, with a near-30 per cent chance of a half-point cut coming as early as next week, according to CME’s Fedwatch tool.
Wall Street had staged an impressive rebound in the previous session, after all three major US stock indexes surged more than one per cent, recovering from last week’s selloff.
Later on Tuesday, Democrat Kamala Harris and Republican Donald Trump will debate for the first time before the presidential election on November 5, with the two locked in a tight race.
Investors now turn their attention to Wednesday’s US inflation report, which could provide more clarity on whether the Federal Reserve would deliver an outsized 50-basis point cut when it meets next week.
Expectations are for headline inflation in the United States to have slowed to an annual rate of 2.6 per cent in August, compared with July’s 2.9 per cent.
Oil, which has lost nearly 20 per cent in the last two months alone, driven by concern about global energy demand, was down another 0.5 per cent at $US71.50 a barrel.
Copper futures were down 0.1 per cent at $US9,090 a tonne, while iron ore futures fell 0.7 per cent to $US91.15 a tonne after data showed a drop in Chinese imports.
In currencies, the US dollar strengthened 0.24 per cent against the yen to trade at 143.53.
The euro was flat at $US1.1037, while sterling edge up 0.1 per cent to $US1.3082, after data showed UK wage growth cooled in the three months to July, keeping the case for another Bank of England rate cut.
