World stocks in retreat for second day on growth worries

Thursday, 5 May 2016 00:00 - - {{hitsCtrl.values.hits}}

download Reuters: World stocks fell for the second straight day on Wednesday and metals prices declined, pressured by signs of a renewed and prolonged global growth downturn.

A deluge of lacklustre manufacturing data from across the world set off this week’s selling spree, notably Chinese factory activity shrinking for the 14th straight month, British output at three-year lows, Tuesday’s surprise interest rate cut in Australia and the European Commission downgrading growth and inflation forecasts.

Adding to this, corporate earnings have been consistently undershooting expectations – US S&P 500-listed companies’ first quarter earnings are down 5.4% versus year-ago levels and are set for a third quarter of declines.

“The deflationary pressures remain and it’s hard to see markets making much headway at the moment,” said Richard Griffiths, associate director at Berkeley Futures.

Investors are becoming increasingly convinced that the world’s biggest central banks are powerless to stem the growth malaise despite cutting rates to zero or into negative territory and buying trillions of dollars worth of bonds.

MSCI’s index of world stocks was down a quarter of a% to 2-1/2 week lows after falling 1% on Tuesday for its biggest one-day fall in a month.

Emerging equities also extended losses, falling almost 1%.

European stocks opened on a weak note, with the pan-European FTSEurofirst 300 index, hovering just off three-week lows hit on Tuesday when it slumped almost 2%.

Bourses in London, Paris and Frankfurt were flat to lower, dragged down by weak prices for growth-reliant commodities.

The flight from risk had played out in forex markets with investors favouring currencies from economies with current account surpluses, such as Japan. But the yen slipped off 18-month highs against the dollar of 105.55.

The dollar rose a quarter% against a basket of currencies, recovering from 15-month lows hit on Tuesday.

On bond markets too there were some signs of stabilisation.

Crude futures also inched higher after two days of losses though Brent remains around 7% below 5-1/2-month highs hit at the end of April.