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Global Markets: Asia shares, U.S. stock futures hit as China's export slump jolts investors

Reuters  |  SYDNEY 

By Swati Pandey

SYDNEY (Reuters) - Asian shares and U.S. stock futures skidded on Monday after a shock contraction in Chinese exports pointed to deepening cracks in the world's second-biggest and raised fears of a sharper slowdown in global growth and corporate profits.

E-minis for the S&P 500 declined 0.8 percent, in an indication of heightened risk aversion. Spreadbetters also pointed to a weak start for while FTSE futures slipped 0.4 percent.

Latest data from showed imports fell 7.6 percent year-on-year in December when analysts had predicted a 5 percent rise while exports unexpectedly dropped 4.4 percent, confounding expectations for a 3 percent gain.

The disappointing numbers reinforced fears U.S. tariffs on Chinese goods were starting to take a heavy toll on China's cooling

Softening demand in is already being felt around the world, with slowing sales of goods ranging from iPhones to automobiles, prompting profit warnings from the likes of Apple and

The Australian dollar, a key gauge of global risk sentiment and a liquid proxy for the Chinese yuan, toppled from Friday's one-month peak of $0.7235 to $0.7186 after the dismal data.

"We believe trade growth next year will slow significantly on huge uncertainty and high base," analysts wrote in a note, predicting China's exports and imports to fall 5.1 percent and 6.8 percent respectively this year.

"Significant uncertainty remains as to whether there could be a 'deal' after March 1," they added.

Those concerns sent MSCI's broadest index of shares outside sliding 1 percent from Friday's 1-1/2 month top for its biggest single-day percentage drop since Jan. 2, with Chinese and Hong Kong shares the worst hit.

Liquidity was generally light during Asian hours as was on public holiday.

Chinese shares were in the red, with the blue-chip index down 0.7 percent. Hong Kong's stumbled 1.5 percent while Australian shares reversed early gains to end mostly flat.

Some analysts expect Monday's trade data to provide impetus to Chinese authorities to resolve the trade dispute with

"You could argue that the worse the numbers are the more incentive it provides to resolve the dispute," Ray Attrill, at National Australia Bank, told

"It also amplifies the extent to which they (Chinese policymakers) have to provide stimulus for the domestic economy," Attrill added.

The world's two largest economies have been in talks for months now to try and resolve their bitter trade war, with no signs so far of any substantial progress in negotiations.

analysts said even with the rising probability for both sides to reach an agreement, the tariff and trade disruption appears to have already rippled through the global

"The regional trade growth appears to have slowed substantially after front-loading effect diminished," they said.

In the wake of the trade dispute, China's policymakers have already pledged to step up support this year, following a raft of measures in 2018 including fast tracking infrastructure projects and cuts in banks' reserve requirements and taxes.

DARK CLOUDS

On the earnings front, U.S. banks are in sharp focus with quarterly results from due Monday followed by JPMorgan Chase, Wells Fargo, and later in the week.

Expectations are dour with profits for U.S. companies forecast to rise 6.4 percent, down from an Oct. 1 estimate of 10.2 percent and a big drop from 2018's tax cut-fueled gain of more than 20 percent.

Investor attention was also on the shutdown, now in its 24th day, and with no resolution in sight.

Further clouding the outlook, Britain faces a hugely uncertain path with a vote for a deal for its exit from the due in the on Tuesday.

All these factors were at play last week when the main U.S. indices ended Friday little changed as investors reset positions ahead of key risk events.

In currencies, the euro was subdued as it hit key technical levels following data from on Friday that showed the euro zone's third-largest economy was at risk of recession.

The single currency was last at $1.1475.

The dollar's index, which measures the greenback against a basket of major currencies, edged 0.1 percent lower to 95.57 after two straight days of gains.

In commodities, extended losses from Friday as investors worried about a global slowdown.

U.S. crude fell 58 cents to $51.01 while Brent eased 68 cents to $59.80.

Gold gained to inch towards a recent seven-month high of $1,298.42 an ounce.

(Editing by Shri Navaratnam)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 14 2019. 11:30 IST
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