Global growth worry hits stocks, but U.S. data lifts dollar

NEW YORK (Reuters) – A gauge of global stocks tumbled on Friday after weak economic data from China and Europe intensified global growth worries as investors weighed the broader impact of the trade dispute between the United States and China.

Euro zone business ended the year on a weak note, expanding at the slowest pace in over four years as new order growth all but dried up, hurt by trade tensions and violent protests in France, a survey showed. [nL8N1YJ1W5]

A separate survey showed French business activity plunged unexpectedly into contraction this month, retreating at the fastest pace in over four years in the face of the anti-government protests.

Germany’s private-sector expansion slowed to a four-year low, meanwhile, suggesting growth in Europe’s largest economy may be weak in the final quarter.

The European data came on the heels of weak readings from China, where November retail sales grew at the weakest pace since 2003 and industrial output rose the least in nearly three years, underlining risks to the economy as Beijing works to defuse its trade dispute with the United States.

“Certainly people are now starting to look through to end of cycle and say what could end of cycle look like,” said Erik Knutzen, multi-asset class chief investment officer at Neuberger Berman in New York.

“While we do expect equities to provide a reasonable return next year, as you get later in the cycle, the posture is probably to fade rallies as opposed to keep risk on through the end.”

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 11, 2018. REUTERS/Brendan McDermid

On Wall Street, U.S. stocks were not only hampered by growth worries but by a drop in Johnson & Johnson shares, which lost 10.04 percent, its biggest drop since 2002, as the biggest drag on both the Dow and S&P 500. The company’s stock fell after Reuters reported that the pharma major knew its baby powder was contaminated with cancer-causing asbestos.

The Dow is now down more than 10 percent from its Oct. 3 high, putting each of the three major U.S. indexes in correction territory.

The growth worries overshadowed the latest signs of a thaw in the U.S.-China trade battle, as Beijing said it will temporarily suspend additional 25 percent tariffs on U.S.-made vehicles and auto parts starting Jan. 1, 2019.

The Dow Jones Industrial Average fell 496.87 points, or 2.02 percent, to 24,100.51, the S&P 500 lost 50.59 points, or 1.91 percent, to 2,599.95 and the Nasdaq Composite dropped 159.67 points, or 2.26 percent, to 6,910.67.

Growth concerns sent European stock markets lower to close out the week. The pan-European STOXX 600 index lost 0.63 percent and MSCI’s gauge of stocks across the globe shed 1.58 percent. The STOXX still managed a weekly gain of 0.5 percent, while MSCI’s index is down nearly 5 percent over the past two weeks.

Despite the weak global data, U.S. data was solid and the dollar strengthened, as consumer spending gathered momentum in November, while industrial production rebounded and further cemented expectations the Federal Reserve will raise interest rates at its Dec. 18-19 meeting.

The dollar index rose 0.4 percent, with the euro down 0.51 percent to $1.1303.

FILE PHOTO: Men look at stock quotation boards outside a brokerage in Tokyo, Japan, December 5, 2018. REUTERS/Issei Kato

Britain’s pound once again weakened after two days of gains, as Prime Minister Theresa May said further assurances on her Brexit deal were possible after European Union leaders told her they would not be renegotiating the agreement and scorned her stilted defense of Britain’s departure.

Sterling was last trading at $1.2581, down 0.58 percent on the day.

Benchmark 10-year U.S. Treasury notes last rose 5/32 in price to yield 2.8949 percent, from 2.911 percent late on Thursday.

Additional reporting by Medha Singh in Bengaluru; Editing by Chizu Nomiyama and Jonathan Oatis

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