Global stocks sink for third day as investors temper trade optimism

Global stocks fell for a third straight day on Thursday as investor optimism about U.S.-China trade talks receded, while an early end to the U.S.-North Korean summit in Vietnam and weak Chinese economic data also weighed on sentiment.

The Japanese yen and the Swiss franc, both safe-haven currencies, gained after the United States and North Korea failed to reach an agreement on denuclearization of the Korean peninsula after two days of meetings.

U.S. President Donald Trump and North Korean leader Kim Jong Un had constructive discussions on denuclearization, the White House said, but news of the summit’s early break-up triggered flight-to-quality bids in lower-risk assets.

Riskier assets took a hit, with stocks across the board lower in Europe after the start of trading. The pan-European STOXX 600 index fell more than half a percent. [.EU]

That followed a retreat in Asian equities, which took a hit as progress stalled on trade issues between China and the United States and data showed Chinese factory activity contracting to a three-year low. The Shanghai Composite Index fell half a percent. S&P futures indicated a lower open on Wall Street. [.N]

“The abrupt ending to the Trump-Kim summit encouraged a little selling as it suggests that politics in the region isn’t as stable as previously thought, just like the U.S.-China trade situation – not as robust as investors had believed,” said David Madden, markets analyst at CMC Markets in London.

“The recent declines must be taken in the context of the major rally since late December.”

The Chinese data also showed export orders fell at their fastest pace since the global financial crisis a decade ago, adding to worries about the nearly year-long trade dispute between China and the United States.

U.S. issues with China are “too serious” to be resolved with promises from Beijing to purchase more U.S. goods, and any deal between the two countries must include a way to ensure commitments are met, U.S. Trade Representative Robert Lighthizer told U.S. lawmakers on Wednesday.

Lighthizer said the office of the United States Trade Representative (USTR) was taking legal steps to implement Trump’s decision on Sunday to delay a tariff increase on more than US$200 billion worth of Chinese goods that had been scheduled for Friday.