LONDON: World equities wobbled Thursday as the emerging markets rout continued to pose a major headache for investors, who are already on red alert over Washington’s trade war with Beijing, dealers said.
Europe’s key stock markets in Frankfurt, London and Paris wavered after heady declines of more than 1.0 percent the previous day.
“There are tentative signs that this week’s risk sell off, particularly in emerging markets, could be taking a breather,” noted research director Kathleen Brooks at trading firm Capital Index.
But Asian bourses deepened their losses as concerns about contagion from emerging markets (EM) — centred on Argentina, Turkey and South Africa — frayed investor nerves, while sentiment was also dented by the possibility of further US tariffs on China.
Meanwhile, India’s rupee hit a new record low of 72 to the dollar.
“Animal spirits take hold very quick because investors outside of emerging markets often have EM exposure these days. What happens in the sphere can have an impact on investment elsewhere,” Brooks told AFP.
“Also, contagion works because problems in EM can make people fearful of risky assets elsewhere, and risk in general.”
Worries persist that EM crises will infect the broader global economy and derail growth.
– ‘Danger’ of funding problems? –
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“Emerging markets turmoil reflects concern about the impact of trade wars on growth, tightening monetary policy and a turn lower in EM growth,” added Kit Juckes, macro strategist at French bank Societe Generale.
“Turkey, South Africa and Argentina are all minor players in global markets but they are all countries with sizeable current account deficits who are in danger of running into international funding problems.
“And eventually, contagion is bound to occur, taking volatility up in developed markets.”
The turmoil has revived worries of a repeat from 1997, when a fall in the Thai currency mushroomed into a much broader Asian economic crisis.
David Hussey, head of international equities at Manulife Asset Management, downplayed the seriousness of the selloff but cautioned that September was traditionally a volatile month.
“This EM sell off should not be as serious as 1997,” Hussey told AFP.
“Contagion should be relatively modest — but September is a weak month for markets — so (it is) likely we will get a nice buying opportunity in EM assets over the next few weeks.”
– Trump trade spat –
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Trump’s trade rows meanwhile continue to play out, with a public consultation on his threatened tariffs on $200 billion of Chinese goods ending this week.
Investors are keeping a nervous eye on Washington after the president said last month he wanted to impose the levies as soon as the deadline had passed.
“The China/US trade dispute is barely beginning. Today, consultation on proposed tariffs ends, and then the tariffs will be imposed and then we go from sentiment to economic impact,” added Juckes.
“And then the dispute threatens to move elsewhere and if the result is a hit to global trade growth, that has a huge long-term economic impact.”
Separately, talks between Washington and Ottawa on the revised North American Free Trade Agreement are continuing.
– Key figures around 1030 GMT –
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London – FTSE 100: DOWN 0.1 percent at 7,379.40 points
Frankfurt – DAX 30: UP 0.1 percent at 12,056.23
Paris – CAC 40: UP 0.2 percent at 5,271.45
EURO STOXX 50: UP 0.1 percent at 3,318.92
Tokyo – Nikkei 225: DOWN 0.4 percent at 22,487.94 (close)
Hong Kong – Hang Seng: DOWN 1.0 percent at 26,974.82 (close)
Shanghai – Composite: DOWN 0.5 percent at 2,691.59 (close)
New York – Dow: UP 0.1 percent at 25,974.99 (close)
Euro/dollar: DOWN at $1.1624 from $1.1630 at 2100 GMT
Pound/dollar: UP at $1.2932 from $1.2905
Dollar/yen: DOWN at 111.31 yen from 111.53 yen
Oil – Brent Crude: UP 28 cents at $77.55 per barrel
Oil – West Texas Intermediate: UP seven cents at $68.79
Source: Brecorder
