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Stocks falter on weak China trade data; sterling ticks up ahead of Brexit vote


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Stocks falter on weak China trade data; sterling ticks up ahead of Brexit vote

➤ Global stocks retreat as China's December 2018 trade data disappoints.

➤ Gold, Japanese yen gain as equities slide; Treasurys advance.

➤ Sterling edges higher ahead of crucial Brexit vote in parliament.

➤ U.S. banks kick off earnings season with Citi reporting Q4'18 numbers.

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Futures point to a lower open on Wall Street as Asian and European equities retreated following weaker-than-expected trade numbers from China.

China reported an 18.3% year-over-year plunge in its trade surplus for 2018, with exports in December dropping 4.4% on an annual basis in dollar terms, adding to a string of disappointing data from the world's second-largest economy. The data comes as Chinese Vice Premier Liu He is reportedly expected to visit the U.S. later this month to discuss bilateral trade as both sides work to ease trade tensions.

"This morning's numbers showed that far from improving, the trade picture deteriorated further with exports declining 4.4%, as the global economic picture became more worrying," wrote Michael Hewson, chief market analyst at CMC Markets UK.

Asian equities reversed Friday's gains following the Chinese trade numbers, with the Shanghai SE Composite index falling 0.71% and Hong Kong's Hang Seng down 1.38%. Japanese equity markets are closed for a holiday.

European stocks started the week in the red, with Germany's DAX index slipping 0.77% and the FTSE 100 shedding 0.98% at 6:30 a.m. ET. France's CAC 40 dropped 0.95%, led by declines in luxury groups LVMH Moët Hennessy Louis Vuitton SE, Kering SA and Hermès International SCA amid concerns about China's economy, while Italy's FTSE MIB dropped 1.34% as bank shares fell after the European Central Bank raised issues regarding Banca Monte dei Paschi di Siena SpA's capital.

The risk-off tone in equities looks set to continue on Wall Street, with futures for the S&P 500 down 0.97% and for the Nasdaq 100 slipping 1.25%.

"With the [U.S. Federal Reserve] already signalling a pause in the tightening cycle and signs of improvement in the U.S.-China trade rhetoric seen so far this year, we don't expect today's China trade numbers to have a long-lasting negative impact on sentiment and risk assets," ING analysts said in a note.

Major U.S. banks are set to unofficially kick off the earnings season, with Citigroup Inc. reporting fourth-quarter 2018 numbers. Meanwhile, PG&E Corp. shares plunged more than 50% in pre-market trading after the utility company said it is preparing to file for Chapter 11 bankruptcy, less than a day after announcing the departure of its CEO.

In currencies, sterling edged 0.05% higher against the dollar ahead of tomorrow's vote in the British Parliament on whether to approve Prime Minister Theresa May's Brexit deal with the European Union, with lawmakers looking highly likely to strike down the agreement. Brussels is preparing to delay Britain's exit from the bloc from March 29 until at least July to give May additional time to revise her Brexit deal, according to The Guardian.

"A defeat for the deal should see pressure exerted on sterling as the possibility of a no-deal Brexit comes closer, however there could be a strong counter move back to the topside if it results in the possibility of a complete re-think on Brexit for the U.K.," wrote analysts at Rakuten Securities Australia.

Elsewhere, the euro fell 0.06% versus the dollar as data showed a bigger-than-expected decline in industrial production in the single-currency area, while the Japanese yen, traditionally regarded as a safe-haven asset, gained 0.44% against the U.S. currency. Gold gained 0.43% to $1,295.10 per ounce.

Yields on 10-year Treasurys lost 3 basis points to 2.67%, while those on German Bunds slipped 3 basis points to 0.206%. Brent crude oil fell 1.39% to $59.64 per barrel on the ICE Futures Exchange.

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