Global stocks wary on China trade, Europe talks
AMSTERDAM — Stock markets showed tentative signs of recovery Tuesday in spite of weak trade figures from China and nervousness over European finance ministers’ progress at a meeting focused on easing Spain’s banking crisis.
In early trading in Europe, Britain’s FTSE 100 was up 0.6 percent 5,663.38. France’s CAC-40 was up 1.05 percent at 3,190.27 while Germany’s DAX was also up 0.9 percent at 6,446.29. Futures augured slight gains on Wall Street. Dow futures were up 0.22 percent at 12,713 and S&P 500 futures were up slightly, 0.16 percent, at 1,351.30.
Early Tuesday morning, eurozone finance ministers agreed the terms for Spain’s bank bailout, with up to $30 billion ((euro) 24.4 billion) being made available by the end of the month. Representatives from the 27 European union countries are expected to agree later Tuesday to grant an extension on Spain’s program of deficit cuts until 2014. The interest rate, or yield, on Spain’s 10-year bond dropped from a high Monday of 7.03 per cent to 6.86 percent in morning trade.
Meanwhile, Germany’s constitutional court is to hear arguments on the legality of one of the bailout funds later Tuesday.
Stock markets in Asia declined after China said the growth rate for its imports fell in June by half from the previous month’s level to 6.3 percent while exports grew 11.3 percent, down from May’s 15.3 percent.
China’s slowing demand for oil, iron ore and other foreign goods is bad news for commodity-exporting economies and others that had been looking to relatively strong Chinese growth to help drive demand for their products.
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 percent to 8,857.73 and Hong Kong’s Hang Seng was off 0.2 percent at 19,396.36.
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 percent over the rest of this year.
Benchmark oil for August delivery was down 71 cents at $85.25 a barrel in electronic trading on the New York Mercantile Exchange.
In currencies, the euro rose slightly to $1.2319 from $1.2309 late Monday in New York. The dollar dropped to 79.29 yen from 79.58 yen.