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Global Markets Follow Wall Street’s Sell-Off as Xi’s Speech Disappoints Wall Street Rebounds Off 2018 Lows as Fed Decision Looms
(about 4 hours later)
HONG KONG — Wall Street’s stumble and a disappointing speech on reform from China’s top leader sent global markets down on Tuesday. HONG KONG — The panic that has gripped Wall Street abated on Tuesday, with stocks rising in early trading after a decline that had left the market at its lowest point in more than a year.
Shares that started mixed in Asia fell decisively into the red by midday on Tuesday following the speech by China’s top leader, Xi Jinping, which commemorated the gradual opening of the Chinese economy that began 40 years ago. Most markets finished more than 1 percent lower. Amid concerns that the global economy is weakening, and corporate profit growth could slow in 2019, investors are focused on a meeting of Federal Reserve policymakers that begins Tuesday. The Fed is still widely seen raising interest rates by a quarter point at the end of that meeting, on Wednesday, but expectations are growing that the central bank will also signal that it is aware that deteriorating conditions in financial markets could reflect real risks for the economy.
European markets opened weaker, though less so, with major exchanges down less than 1 percent. Futures markets that allow investors to bet on Wall Street’s performance suggested stocks in the United States could open modestly higher. Early Tuesday, President Trump repeated his plea with the Fed not to raise rates. Pointing to an editorial in The Wall Street Journal, he argued against a final rate hike for 2018, urging on Twitter that Fed officials avoid “yet another mistake.”
Mr. Xi’s one-and-a-half-hour speech quoted Communist Party theory, failed to mention the trade war between China and the United States and offered little insight into Beijing’s plans. Though Chinese officials do not usually use such high-profile events as a forum for announcing new initiatives, many investors had been hoping that Mr. Xi might introduce new efforts to prop up China’s slowing growth or defuse trade tensions with President Trump. Investors have faced a range of concerns since stocks reached a high in late September, from signs that the trade war between China and the United States is beginning to weigh on global growth to worries that higher interest rates will eat into corporate profits. The result has been a drop not only in stocks, but also risky corporate bonds and commodities. On Monday, the S&P 500-stock index fell more than 2 percent, bringing its losses for the year so far to nearly 5 percent.
Crude oil continued falling Tuesday, with benchmark futures in the United States falling to below $49 a barrel. Energy stocks were also lower.
Investors in energy markets are not just worried about economic growth. They are also concerned about a supply glut amid rising output in the United States and countries like Libya and Venezuela. OPEC has agreed to cut production by 1.2 million barrels per day, but those cuts won’t take effect until next year.
Stocks in Europe were lower, while shares in Asia fell further after a speech on reform from China’s top leader sent markets down on Tuesday.
The speech by President Xi Jinping quoted Communist Party theory, failed to mention the U.S.-China trade war and offered little insight into Beijing’s plans. Though Chinese officials do not usually use such high-profile events as a forum for announcing new initiatives, many investors had been hoping that Mr. Xi might introduce new efforts to prop up China’s slowing growth or defuse trade tensions with President Trump.
“The main question for Chinese markets at the moment is to what extent the government will stimulate the economy and whether there will be a trade deal with the U.S.,” said Tom Rafferty, China regional manager at The Economist Intelligence Unit.“The main question for Chinese markets at the moment is to what extent the government will stimulate the economy and whether there will be a trade deal with the U.S.,” said Tom Rafferty, China regional manager at The Economist Intelligence Unit.
“On both those fronts, Xi’s speech offered little in terms of specifics, and we remain highly skeptical that a deal with the U.S. will be done,” Mr. Rafferty said.“On both those fronts, Xi’s speech offered little in terms of specifics, and we remain highly skeptical that a deal with the U.S. will be done,” Mr. Rafferty said.
Investors had already been shaken by a tumultuous Monday on Wall Street, in which the market hit a new low for 2018. In Europe major exchanges were down less than 1 percent.
Japanese stocks led the decline in Asia, with the Nikkei 225 index falling 1.8 percent. Hong Kong’s Hang Seng Index fell 1.1 percent.Japanese stocks led the decline in Asia, with the Nikkei 225 index falling 1.8 percent. Hong Kong’s Hang Seng Index fell 1.1 percent.
In mainland China, the Shanghai Composite index fell 0.8 percent. Markets in Taiwan and South Korea fell by less than 1 percent.
In Europe, London led the decline in morning trading with a 0.6 percent drop in the FTSE 100 index.