Global stock markets on Friday registered their third consecutive day of losses and were on track to hit their first weekly drop, as concerns over the growing global economic slowdown and the absence of a possible resolution to the US-China trade war kept investors on edge.
Downcast earnings weighed on European shares, with the pan-European STOXX 600 dropping 0.4 percent to €358.46. Spain’s IBEX fell 0.8 percent to €8,858.90, while Germany’s DAX stumbled 0.7 percent to €10,936.25, and UK’s FTSE 100 shrunk 0.1 percent to £7,080.65.
Asian equities were also in the red, with MSCI’s broadest index of Asia-Pacific shares outside Japan slipping 0.5 percent to $510.83, having hit a four-month high a day earlier.
The MSCI All-Country World Index, which monitors stocks in 47 countries, shed 0.3 percent to mark its third straight day of decline. The index was on course to snap a six-week streak of gains.
Darkening Global Economic Skies
Chief Market Analyst Michael Hewson said ever since the US Federal Reserve started to backtrack on its growth expectations for the US economy, the global economic skies, to coin an aphorism from the recent World Bank report, have started to darken further.
According to a January report titled Darkening Skies, the World Bank stated that world economic expansion is expected to slow by 2.9 percent this year, compared with 3 percent in 2018.
The Reserve Bank of Australia (RBA) indicated earlier this week a monetary policy easing in the face of economic headwinds, joining the Fed and the European Central Bank (ECB) in signaling policy shifts.
The US central bank has all but dismissed plans for more rate increases, while the ECB also seemed indecisive about starting to tighten policy this year.
The European Commission on Thursday cut its estimates for euro zone economic growth this year and the next, adding to worries that a worldwide slowdown is spreading to Europe as businesses and investors struggle with trade tensions.
The Bank of England stated on the same day that the UK is experiencing its weakest economic expansion in a decade this year, as Brexit uncertainty rises and the world economy loses momentum.
Sizable Difference in Trade Talks
US-China trade talks comments from President Donald Trump’s chief economic adviser Larry Kudlow provided no support in stock markets.
The White House economic advisor said the administration is hoping for a trade deal with China but there is still a lot of work to do before is anything is finalized.
The President has indicated that he is optimistic with respect to a potential trade deal, Kudlow stated, but added that they got a pretty sizable distance to overcome.
Trump said on Thursday he did not plan to meet Chinese President Xi Jinping before a March 1 deadline scheduled by both parties to seal a trade agreement.
US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer are expected to begin another round of trade negotiations in Beijing next week to push for an arrangement to protect American intellectual property and prevent a raise in US tariffs on Chinese products on March 2.
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