Overnight News From Around The World: Wednesday, September 7

The Wednesday Market Minute

  • Global stocks retreat as of the world's biggest economies shrink in the wake of world trade disputes and oil prices extend their longest losing streak on record.
  • Brent oil has fallen more than 25% since its early October peak, and four-year high, as ramping U.S. production and waivers allowing for the sale of Iranian crude have hammered global prices.
  • Japan and Germany record economic contraction in the third quarter, with both export-focused countries citing a slowdown in global trade.
  • U.K. Prime Minister Theresa May has agreed the text of a deal that will take Britain out of the EU, but needs to first convince opposition lawmakers and rebels in her own party if she is to avoid a government collapse and fresh national elections. 
  • U.S. equity futures slide as investors pullback from risk markets in the wake of macro economic weakness and political uncertainty, with the Dow called modestly higher ahead of third quarter earnings from Macy's and Cisco.  

Market Snapshot

Global stocks retreated Wednesday as investors reacted to both an extended slide in crude oil prices and data showing contraction in two of the world's biggest economies, both of which suggest that the ongoing trade dispute between the U.S. and China is harming growth prospects.

Japan's economy shrank by 0.3% in the three months ending in September, officials said, while Germany's statistics office said GDP contracted for the first time since 2015, with both countries citing weaker foreign trade as the principal catalyst for the pullback in the world's third and fourth largest economies. The data followed a mix set of readings for growth in China, where industrial output and fixed asset investment surprised to the upside but retail sales growth slowed amid a cooling property market.

The softening economic picture was echoed in the now 13-day decline for global crude prices, which extended losses in overnight trading after the biggest single-day slump in three years Tuesday following a bigger-than-expected buildup in U.S. oil stockpiles and data from the Energy Information Administration that suggested shale oil production could rise to as high as 8 million barrels a day next month. 

Oil rebounded modestly, however, during the European trading session after OPEC General Secretary Mohammad Barkindo of Nigeria said the cartel would do "whatever it takes" to address oil market imbalances at its meeting next month in Vienna, raising the prospect of further production cuts from some of the world's biggest producers.

Investors were further spooked by increasing geopolitical uncertainty in Europe, where U.K. Prime Minister Theresa May appears to have reached a deal with her EU counterparts in Brussels to take Britain out of the European Union next year, but must first have it ratified by Parliament in London, where both opposition lawmakers and members of her own party have vowed to rejected it, possibly triggering fresh national elections.

That news comes alongside Italy's decision to defy Brussels by refusing to change any aspects of its proposed 2019 budget, which officials have said is an "unprecedented" breach of deficit rules that will add billions in new borrowing to an economy already staggering under a debt-to-GDP ratio of 132%.

Amid that Kaleidoscope of events, U.S. equity investors are still hoping for a solid open, with futures suggesting a 90-point gain for the Dow Jones Industrial Average and an 8.5 point bump for the S&P 500  

European stocks, however, were weaker at the start of trading Wednesday, with the Stoxx 600 benchmark falling 0.5% by mid-day in Frankfurt and Germany's DAX performance index sliding 0.4% on the back of the weaker-than-expected GDP reading and extended declines for technology and financial stocks.

In Britain, the FTSE 100 was little-changed as oil majors such as BP (BP) and Royal Dutch Shell (RDS.A) held down the benchmark and Brexit uncertainty kept investors on the sidelines ahead of May's crucial cabinet meeting later today in London, where she will attempt to win over her detractors with a deal that attempts to keep the UK closely aligned with the EU's single market while simultaneously allowing it to sign independent trade deals elsewhere.

Oil's historic decline reversed modestly on international energy markets, where Brent crude contracts for January delivery were marked 57 cents higher from their Tuesday close in New York and changing hands at $66.04 per barrel, trimming the decline from their early October peak -- the highest in four years - to around 25%.

WTI contracts for December, the proxy for U.S. crude and a domestic gasoline prices, were seen 22 cents higher at $55.19 per barrel, paring its decline from October to around 27%.

Source : https://www.thestreet.com/markets/stocks-retreat-as-risk-appetite-fades-on-weakening-growth-oil-extends-slump-14780785

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