Asia shares, US stock futures slide as China's exports slump jolts investors

Asian shares and US stock futures skidded on Monday after a shock contraction in Chinese exports pointed to deepening cracks in the world’s second-biggest economy and raised fears of a sharper slowdown in global growth and corporate profits.

Latest data from China showed imports fell 7.6 per cent year-on-year in December when analysts had predicted a 5 per cent rise while exports unexpectedly dropped 4.4 per cent, confounding expectations for a 3 per cent gain.

The disappointing numbers reinforced fears US tariffs on Chinese goods were putting a big strain on China’s already cooling economy.

The Australian dollar AUD=D3, a key gauge of global risk sentiment and a liquid proxy for the Chinese yuan, toppled from Friday's one-month peak of $0.7235 to $0.7186 after the data.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS extended losses to notch a 1 per cent decline from Friday’s 1-1/2 month top, with Chinese and Hong Kong shares the biggest losers.

Liquidity was generally expected to be light during Asian hours as Japan was on public holiday.

Chinese shares were in the red, with the blue-chip index .CSI300 down 0.8 per cent. Hong Kong's Hang Seng index .HSI stumbled 1.4 per cent while Australian shares eased 0.2 per cent after starting firm.

E-minis for the S&P 500 ESc1 declined 0.8 per cent, in an indication of heightened risk aversion.

“The data was very weak and it just adds to the incentives for the Chinese side to strike a trade deal with the US in the coming weeks,” said Ray Attrill, forex strategist at National Australia Bank.

“You could argue that the worse the numbers are the more incentive it provides to resolve the dispute.”

Beijing and Washington have been in talks for months now to try and resolve their bitter trade war, with no signs so far of any substantial progress in negotiations.

“It also amplifies the extent to which they (Chinese policymakers) have to provide stimulus for the domestic economy,” Attrill added.

In the wake of the trade dispute, China’s policymakers have already pledged to step up support this year, following a raft of measures in 2018 including fast tracking infrastructure projects and cuts in banks’ reserve requirements and taxes.

Containers and trucks are seen on a snowy day at an automated container terminal in Qingdao port, Shandong province, China December 10, 2018, Picture take December 10, 2018. REUTERS/Stringer

DARK CLOUDS

On the earnings front, US banks are in sharp focus with quarterly results from Citigroup (C.N) due Monday followed by JPMorgan Chase (JPM.N), Wells Fargo (WFC.N), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) later in the week.

Expectations are dour with profits for US companies forecast to rise 6.4 per cent, down from an Oct. 1 estimate of 10.2 per cent and a big drop from 2018’s tax cut-fueled gain of more than 20 per cent.

Investor attention was also on the US government shutdown, now in its 24th day, and with no resolution in sight.

Further clouding the outlook, Britain faces a hugely uncertain path with a vote for a deal for its exit from the European Union due in the UK parliament on Tuesday.

All these factors were at play last week when the main US indices ended Friday little changed as investors reset positions ahead of key risk events, Reuters reported.

In currencies, the euro was subdued EUR= as it hit key technical levels following data from Italy on Friday that showed the euro zone's third-largest economy was at risk of recession.

The single currency was last at $1.1466.

The dollar’s index .DXY, which measures the greenback against a basket of major currencies, edged 0.1 per cent lower to 95.57 after two straight days of gains.

In commodities, oil prices extended losses from Friday as investors worried about a global slowdown.

US crude CLc1 fell 59 cents to $51 while Brent LCOc1 eased 65 cents to $59.83.

Gold XAU= gained to inch towards a recent seven-month high of $1,298.42 an ounce.