Global stocks sink on China, Saudi unrest

NEW YORK—World stocks and commodities sank yesterday after an unexpected trade deficit in China fuelled concerns about the global economy, while the euro fell after a downgrade of Spain’s credit rating by Moody’s. Stocks were pushed even lower and oil prices erased part of early losses in the afternoon as police confronted protesters in Saudi Arabia. Witnesses said shots were heard and some people were wounded. Asian stocks looked set to open lower, with Nikkei futures traded in Chicago falling more than two per cent to 10,335.

Investors fear unrest could spread from Libya to other oil-producing nations in the Middle East, driving energy costs higher and choking off the global economic recovery. “Saudi Arabia is the main supplier of oil around the world, so people are concerned,” said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, California. Still, US crude oil prices fell 1.6 per cent to US$102.70 a barrel as investors fretted about negative economic data from China, the world’s second-largest consumer of oil. Brent prices ended US51 cents lower at US$115.43.

China posted a trade deficit of US$7.3 billion (£4.5 billion) for February—its first since March 2010 and the biggest since February 2004—as its exports suffered a larger-than-expected impact from the Lunar New Year holiday. US stocks fell nearly two per cent and the Dow sank below 12,000. Wall Street was also pressured by an unexpectedly large increase in claims for unemployment benefits in the United States and a much wider-than-expected US trade deficit. “Overseas issues continue to play a role in US markets. The situation in Europe isn’t complete, the market continues to have concerns about sovereign credit,” said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

The Dow Jones industrial average lost 228.48 points, or 1.87 percent, to 11,984.61, while the Standard & Poor’s 500 Index fell 24.91 points, or 1.89 per cent, to 1,295.11. The Nasdaq Composite Index lost 50.70 points, or 1.84 per cent, to 2,701.02.