Speculation that the Australian central bank could slash already record-low interest rates has hit the local dollar (STR)

London (AFP) – European stocks bounced around on Wednesday while New York got off to a slower start following news that the US trade deficit hit a 10-year high in 2018.

The markets were once again warily watching the US-China trade situation, dealers said.

European sentiment had been dampened earlier in the day after the OECD cut its 2019 global economic growth forecast, citing simmering trade tensions and Brexit uncertainty.

In the US, the Commerce Department reported that the nation’s trade deficit with the world jumped 12.5 percent to $621 billion, as both imports and exports rose to the highest levels ever.

The Dow Jones index was essentially unchanged in early trading.

The data “will fuel the Trump Administration’s fire to correct the trade imbalance with assertive policy actions,” suggested Patrick O’Hare at Briefing.com.

IG analyst Joshua Mahony highlighted “ongoing uncertainty as traders look around for market drivers.

“The US-China trade issue remains a core driver of market sentiment, with hopes of a breakthrough this month driving the bullish sentiment throughout US stocks in particular.

“However, with this current lull in US-China trade talks, we are starting to see some doubt creep in,” he noted.

Earlier in Asia, a Shanghai rally led gains among many markets as Chinese investors appeared increasingly optimistic over trade talks with the US.

With expectations that Washington and Beijing will eventually strike a tariffs deal already baked into equity prices, analysts say officials will need to provide some clarity on progress to give markets another step up.

Many in the markets are hoping for a signing ceremony between US President Donald Trump and his Chinese counterpart Xi Jinping later this month.

“A mid-March meeting… remains the expected next step, but if trade representatives are unable to agree on the final terms of implementation and enforcement measures, we could see the trade truce rally fade,” said Oanda analyst Edward Moya.

After a slow start Shanghai closed 1.6 percent higher to build on Tuesday’s rally, which came on the back of the Chinese government’s decision to slash taxes and ramp up spending.

– OECD downgrades forecasts –

In Europe on Wednesday, the Organisation for Economic Co-operation and Development lowered its global economic growth forecast to 3.3 percent for this year, down from the 3.5 percent it predicted in November.

“High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown,” the OECD said in an interim version of its Economic Outlook.

The OECD, which groups the world’s top developed economies, revised growth estimates lower for almost all of the countries in the G20 group of industrialised and emerging nations.

Britain’s growth forecast, which was based on the assumption of a smooth Brexit, was chopped from 1.4 to just 0.8 percent.

If Britain crashes out of the European Union without a deal on future economic relations, the OECD warned that its outlook would be “significantly weaker”.

– Key figures around 1445 GMT –

London – FTSE 100: UP 0.2 percent at 7,200.79 points

Frankfurt – DAX 30: DOWN 0.2 percent at 11,600.26

Paris – CAC 40: FLAT at 5,298.73

EURO STOXX 50: UP 0.1 percent at 3,329.27

Tokyo – Nikkei 225: DOWN 0.6 percent at 21,596.81 (close)

Hong Kong – Hang Seng: UP 0.3 percent at 29,037.60 (close)

Shanghai – Composite: UP 1.6 percent at 3,102.10 (close)

New York – Dow: DOWN 0.1 percent at 25,806.63 (close)

Pound/dollar: DOWN at $1.3112 from $1.3178 at 2200 GMT

Euro/pound: UP at 86.23 pence from 85.81 pence

Euro/dollar: DOWN at $1.1306 from $1.1308

Dollar/yen: FLAT at 111.89 yen

Oil – Brent Crude: DOWN 11 cents at $65.75 per barrel

Oil – West Texas Intermediate: DOWN 49 cents at $56.07


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