Trade worries keep world stocks subdued, dollar holds gains

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LONDON – World stocks made little progress on Thursday as worries over global trade tensions weighed, while the U.S. dollar consolidated recent bumper gains after the Federal Reserve reaffirmed the outlook for more rate hikes.

The MSCI world equity index, which tracks shares in 47 countries, traded flat in percentage terms. Europe’s pan-European index was down 0.1 percent as the euro held firm.

As the Fed policy meeting threw up no surprises with rates left unchanged, the focus shifted back to simmering trade tensions between the United States and China, as well as the ongoing first quarter earnings season.

In Europe, earnings disappointments from medical technology company Smith & Nephew and postal services provider Bpost soured the mood as the stocks fell 5.9 percent and 10.9 percent respectively, while German drug and crop chemicals maker Bayer flagged a stronger euro in its update.

E-Mini futures for the S&P 500 crept 0.3 percent higher, with overnight results from Kraft Heinz, Tesla and Spotify in focus.

So far it has been a strong earnings season, with the year-on-year blended earnings growth estimate coming in at more than 25 percent in the first quarter for S&P 500 companies, according to Thomson Reuters I/B/E/S data, while the equivalent figure for the MSCI EMU index (European Economic and Monetary Union) is 14.6 percent in dollar terms.

The negative mood carried over from the Asian trading session, where shares slipped as hopes waned for real progress in Sino-U.S. trade talks, following reports the Trump administration is considering executive action to restrict some Chinese companies’ ability to sell telecoms equipment in the United States.

“The risk at the moment is that the increasing uncertainty could create ambiguity in executives’ heads, it makes corporate decision-making more difficult and then (leads to) a decline in investment,” Alastair George, chief investment strategist at Edison Investment Research, said.

Edison’s George added that the impact from trade tensions was hypothetical at the moment, though.

Talks between U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are due to kick off later on Thursday.

However, a breakthrough was viewed as highly unlikely, especially as the U.S. embassy said the delegation would leave as early as Friday evening.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, while South Korean stocks stumbled 0.7 percent.

Hong Kong’s Hang Seng index ended 1.3 percent lower, but Chinese shares bucked the trend. The blue chip CSI 300 was up 0.8 percent, but not far from an eight-month low hit in April. – Reuters

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