Global investors take profits, ending 2019’s longest winning streak

London — World shares faced an end to their longest winning streak of the year as investors took profits on Wednesday before the US Federal Reserve’s policy decision, seen as offering clues to interest rate prospects over the coming year.

European bourses followed Asian peers down, putting the MSCI’s gauge of stocks around the world on course to break seven days of gains, with reports of renewed tension in US-China trade talks also fraying nerves.

The Euro Stoxx 600 fell 0.3%, with indices in Britain and France also slightly down as investors closed positions before the Fed’s decision, due at 6pm GMT.

Germany underperformed, its bourse dragged down as chemicals group Bayer faced its worst day in 16 years after a second US jury ruled its Roundup weedkiller caused cancer.

The US central bank is expected to hold rates steady and cut the number of hikes projected for the rest of the year, signalling since early this year a “patient” approach to increasing borrowing costs.

That patience — interpreted as code for holding off on rate hikes — has come as the US and other parts of the world begin to exhibit signs of slowing growth. Traders expect no rate hikes in 2019 and some are even building in bets for a cut in 2020.

“Some traders expect the Fed to be a little on the neutral side. The Fed will be optimistic — but not overly optimistic — to send a neutral but upbeat message to the market,” said David Madden, an analyst at CMC Markets in London.

Also in play were concerns on rising tension in the US trade negotiations, which pushed MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.2%.

Some market players said investors took money off the table after a report of US concerns that China is pushing back against American demands in trade talks.

On the whole, though, many investors are holding on to hopes of a deal between Washington and Beijing, even as officials from the two sides remained locked in negotiations.

Talks are set to resume next week — the first since US President Donald Trump delayed a March 1 deadline to raise tariffs on Chinese imports — in an acceleration aimed at ending an eight-month trade war between the world’s two largest economies.

US trade representative Robert Lighthizer and treasury secretary Steven Mnuchin plan to travel to China next week for another round of talks with Chinese vice-premier Liu He.

Eager for agreement

“China is eager to come to an agreement so I’m not too worried,” said Wang Shenshen, strategist at Tokai Tokyo Research Center. “As long as they are holding meetings, many things will work out.”

Kazakhstan’s tenge fell 0.5% against the dollar as Kassym-Jomart Tokayev, a career diplomat fluent in Russian, English and Chinese, was sworn in as president.

Tokayev pledged to continue the policies of veteran leader Nursultan Nazarbayev, who unexpectedly resigned on Tuesday after three decades in power, and will serve out the presidential term ending in April 2020.

It was unclear whether Tokayev, the former prime minister, will run for a full term as president of the vast oil- and gas-rich country of 18-million people, adding to uncertainty for investors already facing a shift from long-term structural reforms towards populist policies.

Expectations of a more cautious US Federal Reserve have dented the US dollar, already under pressure this year as Fed chair Jerome Powell all but signalled a pause to the tightening cycle at the previous meeting.

The reports of increased tension in trade talks pushed the dollar up, with safe-haven bids in demand, though gains were slim as the Fed decision loomed.

The greenback edged up 0.1 % against a basket of key rival currencies to 96.297, finding its footing after plumbing its lowest level since March 1 in overnight trading.

Sterling fell 0.3% to $1.3220 as turmoil grips Britain’s exit from the EU. Prime Minister Theresa May will request a short delay to Brexit on Wednesday after her failure to get a divorce deal ratified, leaving the future of the Brexit divorce uncertain.

Oil prices were firm, supported by supply cuts led by producer club Opec as well as US sanctions against Iran and Venezuela, though gains were limited by concerns over global economic growth.

International Brent crude oil futures were at $67.65 a barrel by 9.25am GMT, up 0.1% from their last close.

Reuters