GLOBAL MARKETS-China worries send stocks down, rising supply hits oil

  • Reuters
  • Stock Market News
GLOBAL MARKETS-China worries send stocks down, rising supply hits oil
Credit: © Reuters.

(Adds gold, oil settlement prices)

* Warnings from Caterpillar , Nvidia highlight China worries

* Crude oil drops on expectations of growing U.S. supply

* U.S.-China trade talks, FOMC meeting in focus

By Herbert Lash

NEW YORK, Jan 28 (Reuters) - Global stock markets tumbled on Monday after Caterpillar and Nvidia Corp warned of weak Chinese demand while oil headed for its biggest one-day drop in a month on expectations of growing U.S. crude supply.

Equities also were slammed by a plunge in shares of Brazilian miner Vale SA VALE.K wiped out about $16 billion in market value following the collapse of a tailing dam last week that killed at least 60 people. Vale shares dropped 22.6 percent in Sao Paulo trade.

The dollar fell against a basket of currencies as traders awaited the Federal Reserve's two-day policy meeting ending Wednesday and U.S.-China trade talks this week.

The euro reached a 10-day high against the dollar ahead of voting in Britain's parliament on Tuesday that aims to break the Brexit deadlock.

Caterpillar CAT , a bellwether for global industrials, fell 9.2 percent as its quarterly profit widely missed Wall Street estimates on softening Chinese demand, a strong dollar and higher manufacturing and freight costs. NVDA.O slid 15.4 percent after the chipmaker cut its fourth-quarter revenue estimate by half a billion dollars, hit by weak demand for its gaming chips in China and lower-than-expected data center sales. companies cite China as problematic regarding their earnings, investors realize China-related issues are going to spread, said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.

"Without China growing at a good clip it will be hard for the global economy and the U.S. to continue an expansion," Nauman said.

Earnings at Chinese industrial firms shrank for a second straight month in December, hit by slowing prices and weak factory activity amid the protracted U.S.-Sino trade war. FTSEurofirst 300 index .FTEU3 of leading regional shares closed down 0.96 percent while MSCI's all-country world equity index .MIWD00000PUS declined 0.77 percent.

Stocks on Wall Street fell more than 1 percent.

The Dow Jones Industrial Average .DJI fell 291.41 points, or 1.18 percent, to 24,445.79. The S&P 500 .SPX lost 29.04 points, or 1.09 percent, to 2,635.72 and the Nasdaq Composite .IXIC dropped 98.00 points, or 1.37 percent, to 7,066.87.

Emerging market stocks .MSCIEF lost 0.4 percent.

Volatility has picked up as investors fret about an economic cycle that is long in the tooth, leading to sharp reactions in the market to news, said Laura Kane, head of investment themes for the Americas at UBS Wealth Management.

Equity markets have solid underpinnings with fourth-quarter earnings looking good, a likely truce in the U.S.-China trade talks and the Fed sounding a dovish message, leading her to be optimistic, Kane said.

"But the complication of volatility being uncomfortable and the fact we're later cycle, that's why we're seeing these larger reactions to market news than we're used to," she said.

U.S. energy companies last week boosted the number of rigs drilling for oil for the first time since late December, crude production, which rose to a record 11.9 million barrels per day late last year, has undermined sentiment in the oil market, traders said.

Also weighing on oil prices are concerns about whether Chinese refiners will continue to import crude at 2018's breakneck pace.

U.S. crude CLc1 settled down 3.17 percent at $51.99 per barrel and Brent LCOc1 fell 2.77 percent to settle at $59.93.

In FX markets, the ICE (NYSE: ICE ) index that tracks the dollar versus the euro, yen, sterling and three other currencies .DXY was down 0.07 percent at 95.730. It hit a near two-week low at 95.673 earlier in the session.

The euro EUR= rose 0.14 percent to $1.1428 while the Japanese yen JPY= strengthened 0.23 percent versus the greenback at 109.28 per dollar.

Benchmark 10-year U.S. Treasury notes US10YT=RR rose 3/32 in price to push their yield down to 2.7404 percent.

U.S. gold futures GCv1 settled up 0.4 percent at $1,303.10 per ounce.

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