Worries about growth returned (Kazuhiro NOGI)

London (AFP) – Stock markets on both sides of the Atlantic took a steep downward turn on Tuesday after a US survey pointed to the worst level of manufacturing contracts in a decade.

Combined with a weak inflation reading from the eurozone, and confirmation that British GDP fell 0.2 percent in the second quarter, the figures rekindled fears for worldwide growth. 

Global trade fears were behind the surprise drop in the ISM manufacturing index, the US survey said, worries that immediately fed into existing anguish about the impact of an ongoing US-China trade war.

“A more than 10-year low in ISM’s Manufacturing Index joined soft reads from the sector out of the eurozone and UK to amplify global growth concerns,” said analysts at Charles Schwab.

Eurozone stocks, which had spent most of the session calmly tweaking portfolios at the start of the final quarter, suffered an abrupt fall to end the day sharply lower.

Wall Street, which had opened higher, gave up opening gains to trade well in the red by the late New York morning.

– Optimism cut short –

The US data obliterated what little optimism lingered across trading rooms ahead of US-China trade talks resuming this month.

Investors are now looking to a US jobs report on Friday for further clues to the state of the world’s top economy.

They are also eagerly awaiting next week’s resumption of trade talks between Beijing and Washington, said Quincy Krosby, chief market strategist of Prudential Financial.

The latest discussions set for October 10 are “clearly a positive for the markets because the effect it has on the world economy is paramount going into the last quarter”, Krosby said.

Meanwhile, the World Trade Organization on Tuesday cut its 2019 trade growth forecast to 1.2 percent, a sharp downgrade on the 2.6-percent rise predicted in April, which the body blamed on trade tensions. 

“The darkening outlook for trade is discouraging but not unexpected,” WTO director general Roberto Azevedo said in a statement.

Earlier, Asian stocks had performed well.

Sydney’s stock market closed up 0.8 percent and the Australian dollar dipped after the Reserve Bank of Australia cut interest rates to a new low.

Elsewhere, an attempted recovery in oil prices from a four-percent drop on Monday was cut short by growth worries.

– Key figures around 1545 GMT –

London – FTSE 100: DOWN 0.7 percent at 7,360.32 points (close)

Frankfurt – DAX 30: DOWN 1.3 percent at 12,263.83 (close)

Paris – CAC 40: DOWN 1.4 percent at 5,597.63 (close) 

EURO STOXX 50: DOWN 1.4 percent at 3,518.25

New York – Dow: DOWN 0.8 percent at 26,711.06

Tokyo – Nikkei 225: UP 0.6 percent at 21,885.24 (close)

Hong Kong (closed) – Hang Seng at 26,092.27

Shanghai (closed) – Composite at 2,905.19

Euro/dollar: UP at $1.0932 from $1.0900 at 2050 GMT

Pound/dollar: DOWN at $1.2256 from $1.2294

Dollar/yen: DOWN at 107.72 yen from 108.10 yen

Brent North Sea crude: UP 0.1 percent at $59.30 per barrel

West Texas Intermediate: DOWN 0.2 percent at $53.98 per barrel 

burs-jh/ach 

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.