Global stock markets fall after China says trade growth slowed in June

By Alex Kennedy

THE ASSOCIATED PRESS

SINGAPORE — Stock markets were mostly lower Tuesday after China’s latest trade figures suggested a sharper downturn for the world’s No. 2 economy amid weakening global demand.

In early trading in Europe, Britain’s FTSE 100 added 0.1 per cent to 5,631.33. France’s CAC-40 was marginally lower at 3,154.70 while Germany’s DAX was down 0.2 per cent at 6,374.87. Futures augured losses on Wall Street. Dow futures were down 0.3 per cent at 12,653 and S&P 500 futures were off 0.4 per cent at 1,344.

Stock markets in Asia lost momentum after China said the growth rate for its imports fell in June by half from the previous month’s level to 6.3 per cent while exports grew 11.3 per cent, down from May’s 15.3 per cent.

China’s slowing demand for oil, iron ore and other foreign goods is bad news for other economies that had been looking to relatively strong Chinese growth to help drive demand for their exports.

China cut lending rates last week for the second time in a month in a bid to boost waning economic growth, but some analysts say policymakers have been too slow to react to signs of a sharp slowdown.

“Expectations have been high for a quick turnaround in economic growth but the reality has been a deliberate, ponderous easing that has failed to pre-empt the weaker economic data,” said Sean Darby, chief global equity strategist for Jefferies. “Although valuations are appealing, a modest bearish position seems warranted until interest rates move to their cycle lows.”

Japan’s Nikkei 225 index fell 0.4 per cent to 8,857.73 and Hong Kong’s Hang Seng was off 0.2 per cent at 19,388.28.

South Korea’s Kospi slipped 0.4 per cent to 1,829.45. Australia’s S&P/ASX 200 dropped 0.5 per cent to 4,098.0 and China’s Shanghai Composite shed 0.3 per cent to 2,164.44.

Other analysts argue that investors may be too pessimistic. The U.S. and Europe will likely implement strong monetary stimulus measures if growth slows much further, and many stocks are cheap when valued against their likely earnings, said Garry Evans, global head of equity strategy for HSBC in Hong Kong.

“It’s wrong to be too bearish,” Evans said. “Central banks offer likely support for equity markets. With valuations this low, indexes can rise in line with earnings growth.”

Evans said he expects global stocks to rise 9 per cent over the rest of this year.

On Monday, the Dow Jones industrial average closed down 0.3 per cent at 12,736.29. The Standard & Poor’s 500 fell 0.2 per cent to 1,352.46. The Nasdaq composite was down 0.2 at 2,931.77.

Benchmark oil for August delivery was down $1.02 at $84.97 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose $1.54 to settle at $85.99 on Monday in New York.

In currencies, the euro fell slightly to $1.2293 from $1.2309 late Monday in New York. The dollar dropped to 79.29 yen from 79.58 yen.

04:15ET 10-07-12