Stocks turn down as outlook darkens, confidence down

LONDON: US stocks followed European stocks down Wednesday on stubborn worries over global trade and high oil prices, while an EU offer to extend Britain’s Brexit transition period could not keep London in positive territory.

That offer and lower British inflation had briefly helped the FTSE 100 index higher but the index closed just in the red, while Frankfurt and Paris suffered larger falls despite earlier Asian gains.

On Wall Street, the Dow had shed 0.3 percent more than two hours into trading.

Barclays chief European economist Antonio Garcia Pascual said two key factors were casting a shadow over the wider outlook: the potential prospect of $100 oil and the festering global trade war.

Capital Economics warned of an impending slowing of the US economy as monetary policy tightens.

“We are not explicitly forecasting a recession, but we believe that the economy will slow sharply in 2019 as prior monetary tightening bites and fiscal stimulus fades,” the consultancy said.

Oil fell Wednesday after data showed a drop in US stockpiles — but dealers kept a close eye on Riyadh, with major producer Saudi Arabia under intense pressure over the disappearance of journalist Jamal Khashoggi.

– Oil supply shock? –

Traders are on tenterhooks over any fallout because OPEC kingpin Saudi Arabia is the world’s biggest oil exporter.

Investors fear oil could shoot back above $100 per barrel on Saudi tensions — and also on sliding output from Iran which faces renewed US sanctions next month.

“This is a big issue for Europe in general because Europe is highly oil dependent,” Pascual told AFP.

“A big supply shock could be something that Europe would not cope very well with.”

Meanwhile, this year US President Donald Trump has levied or threatened tariffs on goods from economies around the world, notably China, but also on traditional allies including the European Union.

“I’m very worried about trade,” said Pascual, noting Trump’s threat of a 25-percent tariff on European car imports.

“We have US-China trade war — but we also have the prospect of a US-EU trade war.”

– ‘Worst case scenario’ –

Barclays estimates that a scenario of $100 oil could slash 0.6 percentage points from its current 2019 global economic growth guidance of 3.8 percent.

The bank also estimates that its “worst-case scenario” of $100 oil and a US-EU trade war could slash 2019 eurozone economic growth by 1.0 percentage points from its current forecast of 1.9 percent.

European economies are already being buffeted by concerns surrounding Brexit as well as Italy’s fiscal troubles.

– Key figures around 1545 GMT –

New York – Dow Jones: DOWN 0.3 percent at 25,722.43

London – FTSE 100: DOWN 0.1 percent at 7,059.40 points (close)

Frankfurt – DAX 30: DOWN 0.5 percent at 11,724.09 (close)

Paris – CAC 40: DOWN 0.5 percent at 5,144.95 (close)

EURO STOXX 50: DOWN 0.4 percent at 3,243.08

Tokyo – Nikkei 225: UP 1.3 percent at 22,841.12 (close)

Shanghai – Composite: UP 0.6 percent at 2,561.61 (close)

Hong Kong – Hang Seng: Closed for a public holiday

Euro/dollar: DOWN at $1.1540 from $1.1574

Pound/dollar: DOWN at $1.3132 from $1.3181