Opening Bell: Global Growth Disappointments Hit Stocks, Boost Yen, Bonds

Short-term pound bulls are fighting medium-term bears, as the chart illustrates. Sterling's rebound since December is testing the top of the downtrend line since May.

During the previous Asian session, regional indices took a beating as China’s official economic growth index showed a 6.6 percent drop for 2018, marking the slowest growth pace since 1990 and thereby exacerbating investor fears.

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In the U.S., Friday's session saw equities seal a fourth straight daily gain, capping the fourth straight weekly advance. Several factors fueled optimism, including Chinese vows to increase imports and better-than-expected earnings results for major U.S. banks. This included higher expectations for forward growth, which helped easing market worries after companies had posted softer guidance at the end of last year.

Conversely, sentiment soured on the trade-talks front amid a perceived lack of progress on technology copy rights—a key issue within U.S.-China negotiations. Adding fuel to the fire, U.S. President Donald Trump tweeted: “China posts slowest economic numbers since 1990 due to U.S. trade tensions and new policies. Makes so much sense for China to finally do a Real Deal and stop playing around!"

China posts slowest economic numbers since 1990 due to U.S. trade tensions and new policies. Makes so much sense for China to finally do a Real Deal, and stop playing around!

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Based on recent reports, analysts and fund managers have increasingly turned pessimistic, reflecting the market's low appetite for risk. Ajay Kapur, head of Asia-Pacific and global emerging market strategy at Bank of America Merrill Lynch (NYSE:BAC)), told Bloomberg TV:

“Most of the time, when you buy when sentiment is this depressed, you tend to make money; unless there’s a recession.”

Investors are facing a deepening divergence between tailwinds—of trade-war resolution prospects and company growth—and headwinds—of persistent trade negotiation jitters and weakening global growth. Is this the end of the bull market? We believe the coming weeks may give us the answer. Should the S&P 500 2,700 levels hold resistance, as we tend to believe, then the December lows will be tested. That’s where the downtrend line from the September record peak, October-December range and major moving averages is situated.

h2 Up Ahead/h2

• JNJ ) is expected to report earnings before market open, with a $1.95 EPS forecast, from $1.74 for the same quarter last year.
• propel a turnaround .
• UTX ) is due to report earnings Wed. before market open, with a $1.51 EPS, a little less than last year’s $1.6 for the same quarter.
• TXN ) is scheduled to release results on Wednesday after market, with a consensus of a $1.24 EPS, from $1.09 posted in the same quarter last year.
• F ) is due to report earnings on Wednesday after market, with an EPS forecast of $0.3, from last year’s $0.39.
• The World Economic Forum, the annual gathering of global leaders in politics, business and culture, opens in Davos, Switzerland, on Tuesday.

• Canadian Manufacturing Sales for November arereleased Tuesday.

• Canadian Wholesale Sales for November are released Tuesday.

• Canadian Retail Sales and Core Retail Sales for November are released Wednesday.

• Monetary-policy decisions are due from the European Central Bank (both Thursday).

h2 Market Moves/h2

Stocks

• Canada’s S&P/TSX Composite closed up 0.33 percent Monday.

• The STOXX 600 declined 0.3 percent, the largest drop in more than a week.
• Futures on the S&P 500 slid 0.7 percent, the first retreat in more than a week and the biggest dip in almost three weeks.
• The U.K.’s FTSE 100 gave up 0.4 percent.
• Germany’s DAX fell 0.3 percent.
• The MSCI Emerging Market Index dropped 0.6 percent, the largest drop in more than a week.
• The MSCI Asia Pacific Index declined 0.6 percent, the biggest drop in more than a week.

Currencies

• The Canadian loonie was down 0.31 percent against the U.S. greenback early Tuesday, trading at 0.7499.

• The Dollar Index climbed 0.08 percent, hitting the highest in almost three weeks with its sixth straight advance.
• The euro fell 0.1 percent to $1.1358, the weakest in three weeks.
• The British pound slid 0.2 percent to $1.2872, the weakest in a week.
• The Japanese yen gained 0.3 percent to 109.38 per dollar, the biggest rise in more than a week.

Bonds

• Canada’s 10-year yield was down early Tuesday at 1.993, a 1.24-percent decrease.

• The yield on 10-year Treasurys lost four basis points to 2.75 percent, the largest tumble in more than a week.
• Germany’s 10-year yield fell two basis points to 0.24 percent, the biggest fall in a week.
• Britain’s 10-year yield slid two basis points to 1.3 percent, the lowest in a week.
• Italy’s 10-year yield dropped less than one basis point to 2.756 percent.

Commodities

• West Texas Intermediate crude declined 0.8 percent to $53.38 a barrel, the largest drop in more than a week.
• Gold rose 0.2 percent to $1,283.44 an ounce.