China unease weighs on stocks, lifts yen

LONDON (Reuters): A sharp sell-off in Chinese shares dragged world stock markets lower and boosted the safe-haven yen on Wednesday amid renewed concerns about the outlook for China’s economy.

Tuesday’s weak Chinese trade figures and slide in oil prices have revived global growth concerns and prompted investors to push the pause button on a rally in global stocks.

European shares opened higher but held below recent one-month highs, while risk aversion lifted the Japanese yen against the dollar and the euro.

In Asia, Chinese shares closed more than 1% lower, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%, down 1.4% from a two-month high hit on Monday.

Japan’s Nikkei ended the day down 0.8%, its lowest close in a week.

“Investors are once again focused towards the scanty economic data over in China and the anxiety is if the People’s Bank of China has the right tools to help the recovery,” said Naeem Aslam, Chief Market Analyst at AvaTrade.

China’s February trade performance was far worse than economists had expected, with exports tumbling the most in over six years.

Exports dived 25.4% from a year earlier on depressed demand in all of China’s major markets, while imports slumped 13.8%, the 16th straight month of decline.

The overnight sharp slide in oil also proved worrisome for investors although crude prices were on firmer ground in early Wednesday trade.

Brent crude oil futures LCOc1 hit a high of $39.97 per barrel around 0700 GMT before dipping back to $39.92, still up 27 cents from their last close and over 40% higher than the 2016 lows hit in January.

US crude futures CLc1 were at $36.70 per barrel, up 20 cents from their last settlement and also over 40% above February’s 2016 low.

Oil prices fell about 3% on Tuesday, ending six days of gains for benchmark Brent crude futures, after industry data showed US stockpiles reached record highs again last week.

“Although oil prices have risen sharply from the trough, many investors are not yet convinced if things have improved that much and I suspect they judged now is a good time to sell,” said Tatsushi Maeno, Managing Director of PineBridge Investments. “But I do believe that this year the global economy will prove better than last year,” he added.