Asia stocks mostly slip in turbulent session ahead of US-China trade talks
The mainland Chinese markets, watched closely due to the ongoing trade war between Beijing and Washington, lost their early gains to close lower: The Shanghai composite shed about 0.18 percent to close at approximately 2,596.98 while the Shenzhen component ended its trading day slightly lower at around 7,589.58. The Shenzhen composite slipped 0.377 percent to close at 1,314.99.
Hong Kong's Hang Seng index was largely flat, as of its final hour of trading, with shares of Chinese tech giant Tencent slipping more than 0.5 percent.
In Japan, the Nikkei 225 slipped 0.60 percent to close at 20,649 while the Topix fell 0.68 percent to end its trading day at 1,555.51. Shares of Japanese conglomerate Softbank Group declined more than 1.17 percent.
South Korea's Kospi closed largely flat at 2,177.30 as shares of Samsung Electronics rose 0.67 percent. Other tech stocks, however, struggled for gains: Chipmaker SK Hynix fell 3.75 percent, LG Electronics declined 2.59 percent and Samsung SDI was down 0.22 percent.
Australia's stock market was closed on Monday for a public holiday.
Asia-Pacific Market Indexes Chart
|NIKKEI||Nikkei 225 Index||NIKKEI||20649.00||-124.56||-0.60|
|HSI||Hang Seng Index||HSI||27576.96||7.77||0.03|
|ASX 200||S&P/ASX 200||ASX 200||5905.60||39.90||0.68|
|CNBC 100||CNBC 100 ASIA IDX||CNBC 100||7744.86||6.60||0.09|
Investors will be watching for any important developments on the U.S.-China trade front, with the two sides racing to strike a deal before a deadline in early March. Beijing and Washington have been locked in an ongoing trade war, which saw both sides slap tariffs on each other's goods.
"Hopes are fairly buoyant with Chinese Vice Premier Liu He set to arrive in the US to lead Beijing's negotiations this time. An open and constructive dialogue is expected, given low-hanging fruits on trade deficit reduction. But a 'comprehensive deal' will elude," Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a morning note.
For his part, Varathan said he expected "time may be bought" on hiking tariff rates on the $200 billion worth of Chinese imports from 10 percent to 25 percent. But, he added, rolling back tariffs is "too high a bar."
Ahead of the expected trade negotiations, U.S. Treasury Secretary Steven Mnuchin said he thought the two countries were "making a lot of progress" in trade talks and that he looked forward to discussions with China's Liu, Reuters reported last Friday.
Mnuchin's comments came hours after Commerce Secretary Wilbur Ross told CNBC that the U.S. was still "miles and miles " from reaching a trade deal with China.
"There's still an unwillingness on China to make the concessions on investment and a level playing field the U.S. firms want," Simon Baptist, chief economist at The Economist Intelligence Unit, told CNBC's "Street Signs" on Monday.
In particular, Baptist cited the ongoing pressure on Chinese telecommunications firm Huawei as possible justification by Beijing to refuse changing its position on foreign firms.
The New York Times reported that U.S. President Donald Trump's administration has been pressuring America's allies to bar Huawei and other Chinese tech firms from building the infrastructure needed for the implementation of the next generation 5G wireless standard.
Huawei is under mounting international pressure about the security of its technology, which has become part of the larger narrative in the U.S.-China trade battle.
"The FOMC meeting will reflect on the Fed's position in taking rate decisions off auto-pilot and the likely pace for the rest of 2019. We think the Fed may sound more dovish and be more aligned with the market expectation of limited room for rate increases this year," Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Management, said in a note.
"We will also look for hints of any change in the Fed's strategy to reduce its balance sheet, even though economic momentum is still robust enough for the Fed to hold on for now," he said.
The Japanese yen, widely seen as a safe-haven currency, traded at 109.33 against the dollar after seeing lows above 109.8 in the previous trading week. The Australian dollar changed hands at $0.7190 after touching lows below $0.710 last week.
— CNBC's Berkeley Lovelace Jr. contributed to this report.
Europe markets close lower as optimism fades on global growth
European Markets: FTSE, GDAXI, FCHI, IBEX
However any momentum was checked after US stocks were dragged down by a profit warning from industrial bellwether, Caterpillar.
In political news. President Donald Trump told The Wall Street Journal on Sunday that another government shutdown is “certainly an option,” expressing doubts that Congress would reach a deal to fund the border wall.
U.K. Prime Minister Theresa May will put her latest Brexit efforts to a vote on Tuesday. If she gets the backing from lawmakers she is set to go back to Brussels to get more concessions. However, the message from the European 27 countries remains that the current exit agreement will not be renegotiated. The impasse continues ahead of the scheduled date for departure — March 29.
Back in the corporate world, Tesco may cut thousands of jobs by replacing staff with vending machines, Reuters reported. Shares were down by around 1.5 percent by the closing bell.
Ocado shares rose 1.78 percent on Monday after a report said Marks & Spencer was in talks about a takeover of the company’s supermarket operations. M&S shares were up by 0.21 percent.
Meanwhile, shares of MorphoSys slipped 7.62 percent after news that some if its patents were deemed invalid by a U.S. court.
Dow drops more than 200 points as weak Caterpillar, Nvidia guidance stokes China fears
The Dow Jones Industrial Average fell 236 points as Caterpillar lagged. The S&P 500 dropped 0.9 percent, led lower by the tech, energy and health care sectors. The Nasdaq Composite declined 1.2 percent as Microsoft, Apple, Amazon and Facebook all fell at least 1 percent.
Monday’s decline comes after the Dow and Nasdaq notched their fifth straight weekly gain last week. The major indexes had been soaring since posting a sharp decline on Christmas Eve. In that time, the major indexes have jumped at least 12 percent.
Caterpillar shares fell 9 percent after the industrial giant posted weaker-than-expected earnings for the fourth quarter. The company said its sales in the Asia/Pacific region declined because of lower demand in China. Caterpillar is considered a bellwether for global trade given the company’s exposure to overseas markets. The company also issued disappointing guidance.
Nvidia, meanwhile, dropped 14.4 percent after slashing its fourth-quarter revenue guidance to $2.2 billion from $2.7 billion. The chipmaker said “deteriorating macroeconomic conditions, particularly in China,” impacted demand for its graphics processing units.
“The one thing with China is it’s not a made-up story. It’s not like companies are blaming just the Fed or the weather,” said Quincy Krosby, chief market strategist at Prudential Financial. “As we go through the week, if this becomes a theme in many different sectors, it’s going to lend urgency to the idea that the global economy is slowing and the need for more stimulus.”
The two companies cited China as the second-largest economy in the world tries to bat off concerns that is economic growth is slowing. China is also trying to strike a deal with the U.S. to end a trade war that started last year.
“Reports last week showed that China’s economy grew at the slowest pace in nearly three decades in 2018,” said Bruce Bittles, chief investment strategist at Baird. “In order for the market to continue on an upward path, investors will need to feel more positive that trade worries are on the decline and global growth concerns are abating.”
These reports come as investors brace for the busiest week of the corporate reporting season. More than 100 S&P 500 companies are scheduled to report, including Apple, Microsoft, Amazon and Facebook. Their shares all traded lower ahead of their earnings.
So far, the earnings season is off to a solid start. About 70 percent of the companies that have already reported have beaten analyst expectations, according to data from FactSet.
On the data front, the monthly U.S. jobs report is scheduled for release later this week. Elsewhere, money managers are also waiting for another round of trade talks between China and the U.S., which are set to start later this week. Investors are also bracing for the latest monetary-policy decision from the Federal Reserve, which is due Wednesday afternoon.
The moves Monday also come after Congress and the Trump administration agreed to reopen the government for three weeks. The government had been shutdown for 35 days — the longest stoppage in U.S. history — as both sides could not agree on funding for a border wall. President Donald Trump told The Wall Street Journal on Sunday that another government shutdown is “certainly an option.”
General Electric shares fell more than 2 percent. The move lower comes ahead of the company’s quarterly earnings release scheduled for next week. Gordon Haskett analyst John Inch said in a note the report may have a key change to General Electric’s accounting, which could come as a “shock” to the market.
—CNBC’s Silvia Amaro contributed to this report.