The final day of the third quarter is a moderately dour one for world markets, although the feared wave of selling in Asia following Friday’s reports that Washington may seek to delist Chinese companies from U.S. exchanges didn’t materialise.
Although Wall Street indices ended lower on the reports on Friday, Shanghai stocks only shed about 0.3% on Monday and Hong Kong and Seoul rose more than 0.5%. Tokyo’s Nikkei underperformed, but U.S. stock futures were higher.
Part of that resilience stems from the fact that many see the reports as just a tactic ahead of next week’s resumption of formal trade talks between Washington and Beijing and partly to do with the fact that Chinese markets are effectively closed for the rest of the week for the National Day holidays that encompass 70th anniversary celebrations of the republic.
The latest Chinese September business surveys showed some signs of stabilisation after months of weakness due to the escalated trade war. The offshore yuan stronger against a steady dollar.
In Europe, eyes were on a Financial Times interview with outgoing European Central Bank President Mario Draghi. Draghi, who hands over the leadership of the ECB to former International Monetary Fund chief Christine Lagarde next month, reiterated the need for fiscal policy to support the extraordinary monetary stimulus the ECB continues providing the flagging euro zone economy.
Governments’ failure to do so would just see interest rates remain at extraordinarily low levels for longer, he said. Euro/dollar was little changed first thing, but 10-year German bund yields rose. Flash German September inflation numbers are due out through the morning.
European stock futures were marked lower before the open. A World Trade Organisation ruling on Airbus subsidies is expected this week, with the WTO disclosing the amount of European Union goods the United States can target.
People familiar with the case say the three-person tribunal is expected to award around $7.5 billion, a record for the 24-year-old watchdog, and could target goods from aerospace to luxury goods, or even cheese and wine.
Sterling was steady first thing on Monday, with UK PM Boris Johnson continuing to insist he will not seek an extension to the Oct. 31 Brexit deadline, despite legislation directing him to do so if he doesn’t seal a deal with the EU by the EU summit on Oct 17-18.
Traders will be watching the Conservative Party’s annual conference this week for signs of any cracks in that stance, while finance minister Sajid Javid talks up his fiscal spending plans. The pound was hit on Friday after Bank of England policymaker Michael Saunders held out the possibility interest rates would be cut again if the economy deteriorated.
Elsewhere, New Zealand’s dollar slid to near a four-year low after business confidence there tumbled. Global stocks captured by MSCI’s all-country index were set to record the first negative quarter of 2019 with third-quarter losses around 0.8%.
In the European corporate world, Kloeckner & Co shares are down more than 4% in pre-market trade after a local report that talks over a deal with ThyssenKrupp had collapsed. Anglo-Australian mining company Rio Tinto has cancelled plans for the sale or floatation of its Canadian iron ore business, following unsuccessful attempts to find buyers, according to a Wall Street Journal report.
KPN shares are seen down 5% after reports that Dominique Leroy had been dropped as a candidate for chief executive officer. Leroy is under investigation for her sale of shares in Proximus, the company she is leaving.
Shell is also seen under pressure after saying it sees a net charge of $700 million to $850 million in the third quarter. BP may fall after a report that CEO Bob Dudley is preparing to step down.
— A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own —