Global stock rout eases on China trade pledge; Aussie dollar slumps
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Global stock rout eases on China trade pledge; Aussie dollar slumps

European and Asian stocks dropped on Wednesday following the rout on Wall Street, though declines were contained and US equity futures rose after China pledged to start delivering on trade agreements reached with America. Wall Street was closed on Wednesday to mark the death of President George H. W. Bush.

The Aussie dollar slid close to 1 per cent after Wednesday's weaker-than-anticipated economic growth number for the third quarter. It was trading 0.98 per cent lower at US72.66¢ as of 5:52am.

Global markets were left reeling following Tuesday's steep sell-off in New York, but nerves appeared to steady after China's Commerce Ministry said Beijing will start to quickly implement specific items where there's consensus with the US and will push forward on trade negotiations within the 90-day "timetable and road map."

China's announcemenet ended days of silence from the Asian nation following a weekend meeting between Presidents Donald Trump and Xi Jinping.

China's announcemenet ended days of silence from the Asian nation following a weekend meeting between Presidents Donald Trump and Xi Jinping.Credit:AP

While the Stoxx Europe 600 Index slumped 1.2 per cent, that was far less than the 3.2 per cent plunge recorded by the S&P 500 a day earlier. Futures for America's benchmark S&P 500 Index advanced.

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The break in trading in the US offered respite to investors after a rollercoaster few days, and a chance to reassess what might be behind the latest bout of selling. From the trade war to flattening US Treasury yield curve there was no shortage of culprits, but the underlying narrative appeared to be mounting concern that the global growth picture is not as robust as it seems.

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China's announcement, another twist in the trade war saga, was a dose of positive news. It ended days of silence from the Asian nation following a weekend meeting between Presidents Donald Trump and Xi Jinping. Upbeat statements from Trump had not been immediately matched by Beijing, helping fuel the equity tumult.

Stocks on Wednesday fell in Japan, Korea, Australia and Hong Kong, and China's yuan gave up some of its recent surge. The pound edged higher as investors digested legal advice over Prime Minister Theresa May's Brexit deal, which confirmed that the so-called customs backstop -- the insurance mechanism that kicks in if the Irish border issue cannot be resolved -- could remain "indefinitely."

West Texas oil prices recovered from a drop below $US53 a barrel as traders awaited this week's critical OPEC gathering. It turned out Saudi Arabia, Russia and other members of the OPEC+ group overnight recommended an oil production cut, defying a Twitter plea from President Donald Trump to keep the taps open, but their meeting didn't agree on how big any reduction should be.

Some of the key events investors will be focused on this week:

  • US financial markets are closed Wednesday for a national day of mourning to honour former President George H.W. Bush. Fed Chairman Jerome Powell's testimony to Congress scheduled for Wednesday has been cancelled.
  • Friday brings the US monthly employment report for November.
  • China November trade data are due on Saturday.

And here are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index gained 0.6 per cent as of 2:29 p.m. London time.
  • The Stoxx Europe 600 Index sank 1.2 per cent to the lowest in more than a week on the biggest tumble in six weeks.
  • The UK's FTSE 100 Index sank 1.4 per cent to the lowest in more than eight months on the largest tumble in almost eight weeks.
  • Germany's DAX Index decreased 1.2 per cent to the lowest in more than a week on the biggest dip in more than two weeks.
  • The MSCI Asia Pacific Index decreased 1.1 per cent to the lowest in a week on the largest dip in more than two weeks.
  • The MSCI Emerging Market Index decreased 1.3 per cent, the biggest dip in more than two weeks.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 per cent to the highest in more than a week.
  • The euro gained 0.1 pe rcent to $US1.1352.
  • The British pound climbed 0.3 per cent to $US1.2754, the first advance in a week.
  • The Japanese yen declined 0.3 per cent to 113.13 per dollar, the biggest drop in more than a week.

Bonds

  • Germany's 10-year yield gained one basis point to 0.28 per cent, the first advance in a week and the biggest rise in more than a week.
  • Britain's 10-year yield jumped three basis points to 1.316 per cent, the first advance in more than a week and the largest surge in almost three weeks.
  • The spread of Italy's 10-year bonds over Germany's decreased 11 basis points to 2.7832 percentage points to the smallest premium in almost 10 weeks.

Commodities

  • West Texas Intermediate crude rose 0.6 percent to $US53.57 a barrel, the highest in two weeks.
  • Gold was little changed at $US1,238 an ounce.

Bloomberg

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