➤ Asian shares drop as China manufacturing activity contracts.
➤ European equities fall; Wall Street also set to open lower.
➤ U.S. Treasurys, German Bunds gather steam; Japanese yen, gold also rise.
Wall Street looks set to follow global stocks in the red on the first trading day of 2019 as growth concerns in China and a partial U.S. government shutdown persist.
Asian shares started the new year with losses as data showed manufacturing activity in China contracting in December 2018, reflecting subdued demand amid the trade dispute between Washington and Beijing. The Shanghai SE Composite index dropped 1.15%, while Hong Kong's Hang Seng tumbled 2.77%. Japanese markets will reopen Friday.
The data suggests that the trade dispute has not only damaged growth in China's export sector but has also affected export-related supply chain companies and, in turn, domestic demand, wrote Iris Pang, ING economist for Greater China, in a note. "If domestic demand is not supported by fiscal stimulus quickly, then further weakening will pose a risk to job security. That could create a vicious downwards cycle."
European markets followed their Asian peers lower, with the Stoxx Europe 600 index down 0.75% as of 6:30 a.m. ET and the Euro Stoxx 50 dropping 0.89%. The FTSE 100 slipped 0.75%, led by falls in the mining sector, with shares in Glencore PLC, Antofagasta PLC and Anglo American PLC down more than 4% each.
Germany's DAX index ticked down 0.08%, while France's CAC 40 fell 1.41%. Italy's FTSE MIB dropped 1.27%, with shares in lenders falling about 3% each after the European Central Bank appointed temporary administrators for troubled peer Banca Carige SpA.
Futures point to U.S. stock markets continuing the trend as investors assess the effects of an ongoing partial government shutdown due to the impasse in Washington on funding for President Donald Trump's proposed wall along the U.S.-Mexico border. The shutdown could begin to weigh on market sentiment if it drags on as the new Congress — in which the Democrats control the House of Representatives while the Republicans control the Senate — holds its first session tomorrow, TD Securities said in a note.
Investors flocked to traditional safe-haven assets as equities dropped, with the Japanese yen rising 0.56% against the dollar and gold up 0.59% to $1,288.90 per ounce. Yields on 10-year German Bunds dropped 8 basis points to 0.167%, while those on U.S. Treasurys with the same maturity dipped 2 basis points to 2.66%.
Brent crude oil, meanwhile, started the year down 0.76% to $53.39 per barrel on the ICE Futures Exchange.
The day ahead:
8:55 a.m. ET — U.S. redbook
9:45 a.m. ET — U.S. PMI manufacturing index (Econoday consensus: 53.9)
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