Global stocks fall on US growth worries

World equity benchmarks hit their lowest levels in a month on Wednesday as signs of a slowdown in US economic growth and weak earnings in Europe fanned fears that the US-China trade war could push the global economy into a recession.

A measure of US manufacturing released Tuesday fell to its lowest level in more than 10 years, removing one of few remaining bright spots in the global economy and come just as Europe is seen as close to falling into recession.

“The weakening conditions in Europe and the slowdown in China, it’s all adding up to the same thing essentially: worries that the global economy is slowing and giving investors reason to pause and take profits,” said Robert Pavlik, chief investment strategist manager at SlateStone Wealth LLC in New York.

MSCI’s gauge of stocks across the globe shed 1.49%, following broad declines in Europe that pushed benchmark indices to their lowest levels in a month. The FTSE 100 index slipped 2%, the largest drop across European regions.

On Wall Street, the Dow Jones Industrial Average fell 436.86 points, or 1.64%, to 26,136.18, the S&P 500 lost 46.32 points, or 1.58%, to 2,893.93 and the Nasdaq Composite dropped 118.51 points, or 1.5%, to 7,790.18.

Selling was triggered after the Institute for Supply Management’s (ISM) index of factory activity, one of the most closely watched data on US manufacturing, dropped to the lowest level since June 2009.

Markets had been expecting the index to rise back above the 50.0 mark denoting growth.

“Historically, equity returns are worst when the ISM manufacturing drops from levels below the 50 threshold,” said Patrik Lang, head of equity research at Julius Baer.

“Uncertainty around the US-China trade war is obviously the main reason for the weakness, with companies exposed to global trade increasingly putting off investment decisions.” Concerns about the global economic outlook pushed investors into the perceived safety of bonds. Benchmark 10-year notes last rose 12/32 in price to yield 1.6026%, from 1.644% late on Tuesday.

Asian markets sank on Wednesday following a worse-than-expected reading on US factory activity that revived worries about the impact of the trade war on the global economy.

Adding to the selling pressure in Hong Kong were long-running concerns about the impact of increasingly violent pro-democracy protests in the city that saw a demonstrator shot and wounded by police on Tuesday.

Regional investors took their lead from Wall Street, where equities tanked in response to news that an index of US manufacturing activity fell last month to its lowest point since June 2009.

The data pointed to the impact of the China-US trade war on the world’s top economy and will likely put pressure on Donald Trump to push through an agreement. Top level talks are planned for this month.

Manufacturing is “thought to be the specific chunk of the economy the president must... protect and the sector the US aggressive trade policies were supposed to enhance”, said Stephen Innes, Asia-Pacific market analyst at AxiTrader.

Tokyo ended 0.5 per cent lower, Sydney fell 1.5 per cent and Singapore lost 1.2 per cent, with Manila also off more than one per cent. Taipei, Wellington, Bangkok and Jakarta were also lower.

Seoul shed almost two percent after North Korea fired a missile into the sea just a day after Pyongyang said it would resume stalled nuclear talks this week.

Hong Kong fell -- though it pared earlier steep losses -- as investors returned from a public holiday to mark China’s National Day but which saw some of the worst violence in the city since protests began in June.

A teenager was shot in the chest by a policeman, fuelling fears of a worsening of the unrest that has crippled the city’s economy.

Shanghai was closed for a holiday.

On currency markets the dollar inched back after dropping Tuesday following the US factory data, which led to speculation the Federal Reserve will cut interest rates again this month.

It pushed on against the pound as Prime Minister Boris Johnson prepares to submit his final offer for a new Brexit deal later in the day, warning that if the EU turns it down Britain would leave the bloc this month with no divorce deal.

Dealers are also awaiting the release Friday of US jobs data, which could give an idea about the Fed’s rate plans, while the corporate earning season is also about to get underway.

Euro zone bond yields inched up after another speech from outgoing ECB chief Mario Draghi calling for fiscal stimulus to boost the region’s sluggish economy.

Agencies