Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

U.S. Stock Futures Slide With European Shares After China Data

(Bloomberg) -- U.S. stock-index futures extended declines after a gauge for manufacturing output in China fell into contraction territory for the first time since May 2017, fueling global growth concerns.

March contracts on the S&P 500 Index fell as much as 2.3 percent, after a closely watched gauge of Chinese manufacturing had its lowest reading since May 2017. The contracts bounced and were down 1.6 percent at 10:40 a.m. in London. Nasdaq 100 Index futures and those on the Dow Jones Industrial Average dropped 2.2 percent and 1.5 percent respectively.

European equities also retreated, with the Stoxx Europe 600 index 1 percent lower, led down by sectors sensitive to global growth such as basic resources and autos. Banks and insurers were among the laggards. Europe’s Purchasing Managers’ Index (PMI) readings showed weakness, with Italy contracting, while France’s survey signaled activity shrank for the first time since late 2016. The euro-zone reading was the lowest in almost two years.

The Caixin Media and IHS Markit China’s December manufacturing PMI fell to 49.7 from 50.2 in November, below the 50 threshold for the first time since May 2017. That follows the official gauge, which fell into the same zone for the first time since July 2016 on Monday.

U.S. Stock Futures Slide With European Shares After China Data

Adding to global growth concerns, Singapore’s export-reliant economy grew an annualized 1.6 percent in the three months through December from the third quarter, easing from a revised 3.5 percent gain previously, according to an advance estimate from the Ministry of Trade and Industry Wednesday. The median forecast in a Bloomberg News survey of economists was for a 3.6 percent expansion.

“The disappointment that came through in December has transferred into January as well,” said Jingyi Pan, a Singapore-based market strategist at IG Asia Pte. While there was some small development in uncertain Washington politics, it’s a reminder of the U.S.-China trade tensions and “brings back to the surface worries on growth,” she said.

A fourth quarter sell-off in American equities sent the benchmark to the brink of a bear market late last year as fears of a recession crept up amid intensified U.S.-China trade tensions and a fourth rate hike by the Federal Reserve. The S&P 500 Index closed out 2018 with a 6.2 percent decline, finishing just above 2,500 and ending its worst year since the 2008 financial crisis amid worries the global economy will weaken in 2019.

FedEx Corp. last month slashed its profit forecast just three months after raising it, and pared its international freight capacity amid a slowdown in global trade in recent months, with leading indicators pointing to an ongoing deceleration in the near term. Caterpillar Inc., a bellwether of global growth, was punished by investors in October after repeating its warnings of rising costs due to higher steel prices and U.S. tariffs.

U.S. Stock Futures Slide With European Shares After China Data

Earlier Wednesday, U.S. stock futures rose as much as 0.6 percent after President Donald Trump invited the top congressional leaders from both parties to a White House briefing on border security Wednesday and suggested he wants to “make a deal” to end the government shutdown. It’s the first sign of a possible opening for negotiations to break the stalemate over funding for the border wall.

For 2019, it’s important to anchor investments to where an economy is heading as market sentiment can change very quickly, said Jun Bei Liu, a Sydney-based portfolio manager at Tribeca Investment Partners. Hence the reversal in stock futures is more a lack of confidence as the U.S. economy is still one of the better performers among global peers, she said.

“For the first day of the new year, it would be great to start the year with a green run,” Liu said by phone. “Unfortunately it will probably start in the red.”

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