By David Randall
NEW YORK, Oct 3 (Reuters) - Weaker than expected U.S.
economic data weighed on global financial markets Thursday,
extending a stock slide that has pushed world equity benchmarks
back to lows last seen in August and sending investors into safe
haven assets.
Though it did not signal that the U.S. services sector was
contracting, the closely watched ISM non-manufacturing activity
index came in significantly lower than analysts had been
expecting, increasing fears that the trade war between the
United States and China could push the global economy into a
recession.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.68%, following broad declines in Europe as investors priced in
new U.S. tariffs that are set to be imposed on $7.5 billion of
European goods
Washington will enact 10% tariffs on Airbus AIR.PA planes
and 25% duties on French wine, Scotch and Irish whiskies and
cheese from across the continent as punishment for illegal EU
subsidies to Airbus.
On Wall Street, the Dow Jones Industrial Average .DJI fell
281.81 points, or 1.08%, to 25,796.81, the S&P 500 .SPX lost
25.26 points, or 0.87%, to 2,862.35 and the Nasdaq Composite
.IXIC dropped 63.68 points, or 0.82%, to 7,721.56.
Each index had been slightly positive before the ISM data
was released shortly after the market opened.
Fears of an economic slowdown helped push investors into the
perceived safety of bonds. Benchmark 10-year notes US10YT=RR
last rose 24/32 in price to yield 1.5171%, from 1.597% late on
Wednesday.
"The big question for a lot of folks is whether this is the
third slowdown since the financial crisis or are we now heading
for a global recession," said Anujeet Sareen, a fixed income
portfolio manager and global macro strategist for Brandywine
Global, adding his base case scenario was for a slowdown.
"The wild card in the pack is always Donald Trump and
whatever he tweets next."
Asian shares had racked up losses earlier in the day.
Japan's Nikkei stock index .N225 closed down 2%, its biggest
one-day decline since Aug. 26.
"Risk aversion is broadly on the rise and that has been
triggered by the weakness in U.S. manufacturing ISM data earlier
this week," said Manuel Oliveri, an FX strategist at Credit
Agricole in London.
"The outperformance of the U.S. economy compared to other
major economies has held the dollar and other risky assets up
but that has changed this week."
The string of weak economic data has increased market
expectations that the Federal Reserve will continue cutting
interest rates at its next policy meeting. Traders see a 74%
chance the Fed will cut rates by 25 basis points to 1.75%-2.00%
in October, up from 39.6% on Monday, according to CME Group's
FedWatch tool. FEDWATCH
Bets on a rate cut could rise further if a U.S. non-farm
payrolls report on Friday shows weakness in the labor market.
Brent crude LCOc1 futures were last down 2.5% to $57.54 a
barrel, while U.S. West Texas Intermediate (WTI) crude CLc1
fell 2.8% to $51.17 per barrel.
Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>