Asian shares, US stock futures skid after shock contraction in Chinese exports data
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 economy and raised fears of a sharper slowdown in global growth and corporate profits. Latest data from China 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 putting a big strain on China's already cooling economy. 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 data. MSCI's broadest index of Asia-Pacific shares outside Japan extended losses to notch a 1 percent decline from Friday's 1-1/2 month top, with Chinese and Hong Kong shares the biggest losers.
Liquidity was generally expected to be light during Asian hours as Japan was on public holiday. Chinese shares were in the red, with the blue-chip index down 0.8 percent. Hong Kong's Hang Seng index stumbled 1.4 percent while Australian shares eased 0.2 percent after starting firm. E-minis for the S&P 500 declined 0.8 percent, in an indication of heightened risk aversion. "The data was very weak and it just adds to the incentives for the Chinese side to strike a trade deal with the U.S. in the coming weeks," said Ray Attrill, forex strategist at National Australia Bank.
"You could argue that the worse the numbers are the more incentive it provides to resolve the dispute." Beijing and Washington 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. "It also amplifies the extent to which they (Chinese policymakers) have to provide stimulus for the domestic economy," Attrill added. 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.
On the earnings front, U.S. banks are in sharp focus with quarterly results from Citigroup due Monday followed by JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley 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 U.S. government 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 European Union due in the U.K. parliament 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 Italy on Friday that showed the euro zone's third-largest economy was at risk of recession. The single currency was last at $1.1466. 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, oil prices extended losses from Friday as investors worried about a global slowdown. U.S. crude fell 59 cents to $51 while Brent eased 65 cents to $59.83. Gold gained to inch towards a recent seven-month high of $1,298.42 an ounce.
(With inputs from agencies.)