By Geoffrey Smith
Investing.com - “Sometimes you have to walk,” U.S. President Donald Trump said Thursday after the collapse of his summit with North Korean leader Kim Jong-Un – and the stock market couldn’t agree more.
The Stoxx 600 was down 1.20 points or 0.3%, at 371.38 at 04.00 AM ET (0900 GMT) on a wave of profit-taking after a two-month rally since the start of the year. Germany’s Dax was down 0.3%, the U.K. FTSE down 0.7% and France’s CAC 40 down 0.1%.
A Reuters survey released earlier Thursday showed that fund managers expect the Stoxx 600 to end the year at 371 points, suggesting little or no further upside from current levels.
It’s not just about Korea and nukes. There’s a fresh wave of concern this morning about the strength of the Chinese economy (and hence the global one) after U.S. Trade Representative Robert Lighthizer played down the chance of a comprehensive agreement with China in the near future.
That puts news of a further drop in Chinese manufacturing activity into a particularly bleak context. The Caixin PMI for February showed output contracting at the fastest rate since the end of 2015, when China was exporting deflation to the rest of the world.
No coincidence that the worst performing sectoral indexes this morning are the China-sensitive EURO STOXX Basic Resources Futures, down 0.8%, and the Stoxx Autos & Parts index, down 0.7%
Optimists can still point to a more positive tone on Brexit, where the risk of a chaotic split between the U.K. and EU has fallen sharply in recent days. Much of the drop in the FTSE is the mirror image of a sharp rise in the British pound, which depresses the value of dollar income streams for its oil and mining heavyweights.
And it’s notable that Italy has outperformed this week too, after a dismal performance by the populist 5 Star movement in regional elections suggests the country may return to a more predictable political path.
But all that means today is – to borrow a phrase from Kenny Rogers – that while it’s time to walk away, at least you don’t have to run.