Stocks Fall, Weighed by Lower Oil Prices, Uncertain Economic Outlook
By
Riva Gold
Updated April 5, 2016 7:15 a.m. ET
Global stocks fell while gold and the yen gained, as lower oil prices and an uncertain global economic picture kept investors cautious.
The Stoxx Europe 600 was down 1.9% halfway through the session Tuesday, following steep declines in Japan.
Futures pointed to a 0.9% opening loss for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell.
As investors shed risk, gold gained 1.1% to $1,232 an ounce, while 10-year U.S. and German government bonds both rallied and the yen strengthened to its highest level against the dollar since 2014.
“There are still risks out there,” said Mike Amey, managing director and portfolio manager at Pimco.
Central banks have stabilized markets after a rocky start the year, he said, but U.S. equity valuations remain high and concerns around China and the oil price will continue to be in focus this year, he said.
On Tuesday, falling oil prices weighed on shares of energy and mining companies in Europe and Asia, as Brent crude dropped 0.7% to $37.42 a barrel. The global oil benchmark is down 12% from its high in March.
Downbeat economic news from Europe also added to investors’ concerns. Germany’s DAX fell 2.5%, led lower by the auto sector, following an unexpected decline in German manufacturing orders.
A measure of private sector activity in the eurozone was also revised lower, pointing to the weakest expansion since late 2014. Retail sales came in slightly better than expected, but economists said the outlook for consumer spending in the currency area remained weak.
In Asian trade, Japan’s Nikkei Stock Average fell 2.4% as the yen gained and as concerns about lower interest rates weighed on bank shares.
Bank of Japan Governor Haruhiko Kuroda said Tuesday that he would act quickly to boost stimulus measures if needed to stoke inflation, after the bank introduced negative interest rates in January.
Shares in Australia fell 1.4% after the Reserve Bank of Australia held rates unchanged as expected, while stocks in Shanghai gained 1.5% as the market reopened after a holiday.
In currencies, the dollar was last down 0.8% against the yen at ¥110.4120, while the euro was down 0.3% against the dollar at $1.1354.
Tuesday’s losses followed a downbeat session on Wall Street, where U.S. indexes pulled back from their highest levels of the year.
A series of economic reports are due later in the day, including the U.S. trade balance, which may shed light on whether the effects of a strong dollar are starting to recede, and the Labor Department’s job openings and labor turnover survey.
Two readings on the U.S. services sector will also be closely watched. “This is a service-driven economy,” said Mike Thompson, chair of S&P Investment Advisory Services, noting he expects an improving trend.
Investors are also focused on the coming first-quarter earnings season, which kicks off next week.
“Markets expect a rather lackluster and somewhat weak earnings quarter,” Mr. Thompson said, though “there’s a hope the worst is over.”