The Jim Bakker Show

China posts worst export fall since 2009 as fears of U.S. trade war loom

By Elias Glenn and Sue-Lin Wong

BEIJING (Reuters) – China’s massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the United States that is clouding the outlook for 2017.

In one week, China’s leaders will see if President-elect Donald Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods.

Even if the Trump administration takes no concrete action immediately, analysts say the specter of deteriorating U.S.-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.

The world’s largest trading nation posted gloomy data on Friday, with 2016 exports falling 7.7 percent and imports down 5.5 percent. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009.

It will be tough for foreign trade to improve this year, especially if the inauguration of Trump and other major political changes limit the growth of China’s exports due to greater protectionist measures, the country’s customs agency said on Friday.

“The trend of anti-globalization is becoming increasingly evident, and China is the biggest victim of this trend,” customs spokesman Huang Songping told reporters.

“We will pay close attention to foreign trade policy after Trump is inaugurated president,” Huang said. Trump will be sworn in on Jan. 20.

China’s trade surplus with the United States was $366 billion in 2015, according to U.S. customs data, which Trump could seize on in a bid to bring Beijing to the negotiating table to press for concessions, economists at Bank of America Merrill Lynch said in a recent research note.

A sustained trade surplus of more than $20 billion against the United States is one of three criteria used by the U.S. Treasury to designate another country as a currency manipulator.

China is likely to point out that its own data showed the surplus fell to $250.79 billion in 2016 from $260.91 billion in 2015, but that may get short shrift in Washington.

“Our worry is that Trump’s stance towards China’s trade could bring about long-term structural weakness in China’s exports,” economists at ANZ said in a note.

“Trump’s trade policy will likely motivate U.S. businesses to move their manufacturing facilities away from China, although the latter’s efforts in promoting high-end manufacturing may offset part of the loss.”

On Wednesday, China may have set off a warning shot to the Trump administration. Beijing announced even higher anti-dumping duties on imports of certain animal feed from the United States than it proposed last year.

“Instead of caving in and trying to prepare voluntary export restraints like Japan did with their auto exports back in the 1980s, we believe China would start by strongly protesting against the labeling with the IMF, but not to initiate more aggressive retaliation … immediately,” the BofA Merrill Lynch Global Research report said.

“That said, even a ‘war of words’ could weaken investor confidence not only in the U.S. and China, but globally.”

CHINA’S DECEMBER EXPORTS FALL

China’s December exports fell by a more-than-expected 6.1 percent on-year, while imports beat forecasts slightly, growing 3.1 percent on its strong demand for commodities which has helped buoy global resources prices.

An unexpected 0.1 percent rise in shipments in November, while scant, had raised hopes that China was catching up to an export improvement being seen in some other Asian economies.

China reported a trade surplus of $40.82 billion for December, versus November’s $44.61 billion.

While the export picture has been grim all year, with shipments rising in only two months out of 12, import trends have been more encouraging of late, pointing to a pick-up in domestic demand as companies brought in more raw materials from iron ore to copper to help feed a construction boom.

China imported record amounts of crude oil, iron ore, copper and soybeans in 2016, plus large volumes of coal used for heating and in steelmaking.

“Trade protectionism is on the rise but China is relying more on domestic demand,” said Wen Bin, an economist at Minsheng Bank in Beijing.

Prolonged weakness in exports has forced China’s government to rely on higher spending and massive bank lending to boost the economy, at the risk of adding to a huge pile of debt which some analysts warn is nearing danger levels.

Data next Friday is expected to almost certainly show that 2016 economic growth hit Beijing’s target of 6.5-7 percent thanks to that flurry of stimulus.

But signs are mounting that the red-hot property market may have peaked, meaning China may have less appetite this year for imports of building-related materials.

“It is hard to see what could drive a more substantial recovery in Chinese trade,” Julian Evans-Pritchard, China Economist at Capital Economics, wrote in a note.

“Further upside to economic activity, both in China and abroad, is probably now limited given declines in trend growth. Instead, the risks to trade lie to the downside…,” he said, saying the chance of a damaging China-U.S. trade spat has risen since Trump’s appointment of hardliners to lead trade policy.

A decline in China’s trade surplus in 2016, to just under $510 billion from $594 billion in 2015, may also reduce authorities’ ability to offset capital outflow pressures, which have helped drive its yuan currency to more than eight-year lows, ANZ economists said.

(Reporting by Lusha Zhang, Elias Glenn, Sue-Lin Wong and Kevin Yao; Writing by Sue-Lin Wong; Editing by Kim Coghill)

Global stocks and dollar firmer as Trump news conference approaches

By Vikram Subhedar

LONDON (Reuters) – World stocks and the dollar rose before a news conference by U.S. President-elect Donald Trump in which he is expected to give more details about his plans for the U.S. economy.

Trump’s campaign calls for tax cuts and more infrastructure spending have boosted U.S. shares and the dollar, but his protectionist statements and a flurry of off-the-cuff Tweets have kept many investors from adding to risky positions.

The UK’s FTSE 100 was poised for a record twelfth straight day of gains while European shares rose 0.2 percent.

Stock futures on Wall Street were 0.1 percent firmer though the post-U.S. election rally is showing signs of running out of steam.

Trump has vowed to label China a currency manipulator on his first day in office on Jan. 20 and has threatened to slap huge tariffs on imports from China.

U.S. House of Representatives Speaker Paul Ryan and top members of Trump’s transition team are discussing a controversial plan to tax imports.

Economists have warned that protectionist measures could stifle international trade and hurt global growth.

That brings Trump’s press conference, scheduled for 11:00 EST, into sharp focus.

“From a currency perspective, markets will aim to get a clearer picture on trade, fiscal stimulus and the new administration’s relationship to the Fed,” Morgan Stanley strategists wrote in a note to clients.

The dollar inched higher against the yen on Wednesday but was 0.4 percent firmer against the basket of currencies used to measure its broader strength.

The dollar has gained broadly since Trump’s election in November as investors bet he would boost public spending and spur repatriation of overseas funds by U.S. companies as well as higher inflation and interest rates.

But more doubts have emerged in recent weeks about that narrative, and investors will have a close eye on what the new president says about trade and relations with China.

Bank of America-Merrill Lynch strategists warned on Wednesday that a worrying consensus has developed in financial markets with analysts and investors overwhelmingly bearish on bonds and positive on developed market stocks, financials and the U.S. dollar.

Sterling meanwhile edged towards a 10-week low against the dollar on Wednesday, kept under pressure by fears that Britain will undergo a “hard” exit from the EU in which access to the single market will play second fiddle to immigration controls.

The Turkish lira fell to new lows despite efforts by the country’s central bank to support it with pressures piling on the economy.

An auction of German debt was expected to go down well with investors looking for safe havens. Portuguese yields held near 11-month highs as the country prepared for its toughest bond sale in years.

In commodity markets, oil rose, lifted by reports of Saudi supply cuts to Asia, but gains were capped by a lack of detail about the reductions and because of signs of rising supplies from other producers.

Prices for Brent futures LCOc1, the international benchmark for oil prices, were trading at $53.94 per barrel at 1200 GMT, up 30 cents from their previous close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.11 a barrel, up 29 cents.

(Editing by Hugh Lawson and Toby Chopra)

Hard Brexit is not inevitable, says British PM May

By Elizabeth Piper

LONDON (Reuters) – A clean break with the EU’s single market is not inevitable, British Prime Minister Theresa May said on Monday, seeking to clarify comments that pushed down the pound on the possibility of a hard Brexit from the European Union.

She criticized British media for misinterpreting what she described as long-term position on EU talks but the pound failed to recover from a 10-week low and was down more than 1 percent to the dollar and 1.2 percent against the euro on the day.

May, under pressure to offer more detail on her strategy before launching divorce talks with the European Union, said on Sunday in her first televised interview of the year that Britain would not be able to keep “bits” of its membership.

Some commentators saw that as a sign she was heading for a hard Brexit, which business says would damage the economy by breaking links with the single market of 500 million consumers. May shot back that the media was using terms she did not accept.

“I’m tempted to say that the people who are getting it wrong are those who print things saying I’m talking about a hard Brexit, (that) it is absolutely inevitable there’s a hard Brexit,” she told the Charity Commission, a government department that regulates charities in England and Wales.

“I don’t accept the terms hard and soft Brexit. What we’re doing is (that we are) going to get an ambitious, good, best possible deal for the United Kingdom in terms of … trading with and operating within the single European market.”

May’s frustration was clear. The former interior minister, who was appointed as prime minister shortly after Britain voted to leave the EU at a June referendum, is increasingly concerned that Brexit will define her time in power, sources say.

In her speech on Monday, she said she wanted her government to help to heal the divisions in Britain that were deepened by the EU vote, and ensure that “everyone has the chance to share in the wealth and opportunity on offer in Britain today”.

She announced measures to boost support to those suffering from mental health problems and said she would do more on housing, education and schooling, but despite applause from the audience, two out of four questioners asked about Brexit.

May has repeatedly said she will not reveal her strategy before triggering Article 50 of the EU’s Lisbon Treaty to start some of the most complicated negotiations since World War Two, but her reticence has spurred scrutiny of her every comment.

She has largely stuck to the script that she wants Britain to regain control over immigration, restore its sovereignty and also to get the best possible trading relations with the EU, but any comment that seems to stray is pored over for signs of how May sees Britain’s future relationship with the EU.

Asked whether May had ruled out getting preferential access to the single market in her interview on Sunday, her spokeswoman said she had ruled nothing out or in.

On Monday, May again said she was ambitious before the talks with the EU, which are due to be launched before the end of March.

“But we mustn’t think of this as sort of leaving the EU and trying to keep bits of membership, what bits of membership will we keep,” she said.

“It’s a new relationship, we’ll be outside the EU, we will have a new relationship but I believe that can be a relationship which has a good trading deal at its heart.”

(Additional reporting by William James and Kylie MacLellan; editing by Jeremy Gaunt)

Banks, oil stocks weigh on Wall St., keep Dow from 20,000

By Yashaswini Swamynathan

(Reuters) – The Dow Jones Industrial Average declined on Monday, retreating from the historic 20,000 mark, weighed down by banks and energy companies, while a gain in technology stocks kept the Nasdaq afloat.

Of its 30 components, 20 of the Dow’s stocks were trading lower, led by Goldman Sachs’s <GS.N> 1.4 percent decline. P&G <PG.N> fell 0.9 percent and Coca-Cola <KO.N> dropped 0.5 percent after Goldman downgraded both the consumer staple stocks.

Eight of the 11 major S&P sectors were lower, led by the energy sector’s <.SPNY> 1.3 percent drop. Oil prices fell 2.3 percent as signs of growing U.S. output outweighed optimism that other producers were sticking to a deal to cut supply to bolster prices. [O/R]

The decline meant the Dow moved further away from the 20,000-point mark. It came tantalizingly close on Friday, hitting a record of 19,999.63 as the S&P 500 and the Nasdaq also touched records after a late pop in technology stocks.

The sector again helped the market on Monday.

At 9:41 a.m. ET the Dow <.DJI> was down 57 points, or 0.29 percent, at 19,906.8.

The S&P 500 <.SPX> was down 4.91 points, or 0.22 percent, at 2,272.07.

The Nasdaq Composite <.IXIC> was up 7.83 points, or 0.14 percent, at 5,528.89.

“The market is building drama around 20,000 and if and when we get promising earnings reports, the Dow will go through the point like a hot knife through butter,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

Wall Street’s rally since Donald Trump won the U.S. election in November, with investors betting he will introduce business-friendly policies, has led to lofty valuations.

The S&P is trading at about 17 times expected earnings, compared to its 10-year average of 14. That could make investors cautious as they gear up for the fourth-quarter earnings season.

The first peek into how companies fared last quarter will be provided later this week by big U.S. banks. S&P 500 companies overall are expected to post a 6.1 percent increase in profit in the quarter, according to Thomson Reuters I/B/E/S.

Among stocks, Dow component UnitedHealth <UNH.N> lost 0.6 percent to $161.42 after the insurer’s Optum unit said it would buy Surgical Care Affiliates Inc <SCAI.O> for about $2.30 billion. Surgical Care’s stock was up 15 percent.

VCA Inc <WOOF.O>, which runs hospitals for animals, soared 28 percent to $90.78 after Mars Inc said it would buy the company for $7.7 billion.

Acuity Brands <AYI.N> was the biggest percentage loser on the S&P, falling 16 percent to $199.16 after the lighting solutions provider reported first quarter sales that missed analysts’ expectations.

Declining issues outnumbered advancers on the NYSE by 1,741 to 915. On the Nasdaq, 1,469 issues fell and 942 advanced.

The S&P 500 index showed three new 52-week highs and no new lows, while the Nasdaq recorded 27 new highs and seven new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)

Mexico gas price hike spurs looting, blockades as unrest spreads

Demonstrators march after gas prices are raised in Mexico

MEXICO CITY (Reuters) – Mexicans angry over a double-digit hike in gasoline prices looted stores and blockaded roads on Wednesday, prompting over 250 arrests amid escalating unrest over the rising cost of living in Latin America’s second biggest economy.

Twenty-three stores were sacked and 27 blockades put up in Mexico City, Mayor Miguel Angel Mancera said, days after the government raised gasoline costs by 14 to 20 percent, outraging Mexicans already battling rising inflation and a weak currency.

Mexican retailers’ association ANTAD urged federal and state authorities to intervene quickly, saying 79 stores had been sacked and 170 forcibly closed due to blockades.

Deputy interior Minister Rene Juarez said over 250 people had been arrested for vandalism and that federal authorities were working with security officials in Mexico City and the nearby states of Mexico and Hidalgo to address the unrest.

“These acts are outside the law and have nothing to do with peaceful protest nor freedom of expression,” Juarez said in a press conference late on Wednesday.

Mexican President Enrique Pena Nieto said earlier on Wednesday that the price spike that took effect on Jan. 1 was a “responsible” measure that the government took in line with international oil prices.

The hike is part of a gradual, year-long price liberalization the Pena Nieto administration has promised to implement this year.

State oil company Pemex said on Tuesday that blockades of fuel storage terminals by protesters had led to a “critical situation” in at least three Mexican states.

(Reporting by Alexandra Alper and Lizbeth Diaz; Editing by Simon Cameron-Moore)

Wall Street to open lower after North Korea test, Fed comments

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks were poised for a lower open on Friday amid investor caution following a nuclear test by North Korea and comments by a U.S. Federal Reserve official that supported an interest rate hike.

North Korea conducted its fifth and biggest nuclear test on Friday and said it had mastered the ability to mount a warhead on a ballistic missile, drawing condemnation from the United States as well as China, Pyongyang’s main ally.

“The timing of North Korea flexing their nuclear muscles is interesting in that it comes on the heels of the leader of the free world’s trip to Asia,” said Art Hogan, chief market strategist at Wunderlich Securities in New York, referring to President Barack Obama, who arrived in Asia last week to attend a G20 meeting before touring other Asian nations.

“So that is in and of itself kind of insulting but it’s also disturbing if they are making significant traction here, but it’s hard to know.”

Futures extended losses after Boston Fed President Eric Rosengren, a historically dovish policymaker, said the Federal Reserve increasingly faces risks if it waits too much longer so a gradual policy tightening is likely appropriate.

S&P 500 e-minis <ESc1> were down 11.75 points, or 0.54 percent, with 148,435 contracts changing hands. Nasdaq 100 e-minis <NQc1> were down 28.25 points, or 0.59 percent, in volume of 15,946 contracts and Dow e-minis <1YMc1> were down 101 points, or 0.55 percent, with 16,420 contracts changing hands.

At 9:30 EDT (1330 GMT), Federal Reserve Bank of Dallas President Robert Kaplan, a non-voting member, is scheduled to speak.

The Fed will hold a two-day policy meeting on Sept. 20-21. Expectations for a rate hike had climbed in recent weeks after comments from a number of Fed officials, only to be tamped down again in the past several days after a host of disappointing economic reports. The current expectations for a September rate hike stand at 18 percent, according to CME’s FedWatch tool.

U.S. stocks have been subdued for two months, with the benchmark S&P 500 index failing to register a move of more than 1 percent on a closing basis in either direction since July 8. The index is still only 0.4 percent away from its last record high registered on Aug. 15.

Data due on Friday includes July wholesale inventories at 10 a.m. EDT (1400 GMT), which are not expected to have changed from the prior month.

Also due is the weekly rig count from Baker Hughes, which could impact the price of oil after both Brent <LCOc1> and U.S. <CLc1> prices surged more than 4 percent Thursday in the wake of a surprisingly huge drawdown in U.S. crude stocks.

Restoration Hardware <RH.N> shares surged 10.3 percent to $38.94 in premarket trading after the company posted second-quarter earnings that topped Wall Street expectations.

Pipeline company Enterprise Products Partners <EPD.N> late Thursday withdrew its takeover bid for rival Williams Cos Inc <WMB.N>, saying Williams’ lack of engagement left it with “no actionable path forward.”

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

Oil rally under pressure; record Saudi output offsets U.S. drawdown

By Barani Krishnan

NEW YORK (Reuters) – Oil’s near week-long rally was under pressure on Wednesday after an unexpected drawdown in U.S. crude and gasoline stocks was offset by worries that Saudi Arabia was cranking output to record highs even as OPEC talked of ways to ease a global glut.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down 5 cents at $46.53 a barrel by 1:03 p.m. EDT (1703 GMT), after trading as much as 21 cents higher.

Brent crude futures <LCOc1> rose by 42 cents to $49.65 a barrel. It reached five-week highs of $49.75 earlier.

WTI’s discount to Brent <WTCLc1-LCOc1> widened to a six-month high, raising the export potential for U.S. crude.

Oil rallied about 11 percent over the past four sessions since Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation the group was ready to reach an output freeze agreement with non-OPEC producers.

The markets briefly extended gains after the U.S. Energy Information Administration (EIA) said domestic crude inventories fell 2.5 million barrels last week, surprising analysts who had expected a build of 522,000 barrels. [EIA/S]

Gasoline stockpiles also fell 2.7 million barrels, more than expectations for a 1.6 million-barrel drop, the EIA data showed.

But the market’s upside was capped by a Reuters report that said Saudi Arabia could boost crude output in August to new records at 10.8-10.9 million bpd, overtaking Russia’s production, even as OPEC aims for a pact to curb global output.

The Saudis told OPEC they pumped 10.67 million bpd in July, versus their previous record of 10.56 million in June 2015. [OPEC/M]

Saudi-based industry sources said earlier in the year they expected the kingdom’s output to edge near record highs to meet summer demand for power. But they said it was unlikely that Saudi output will flood the market.

“One certain thing to be aware of is the Reuters report that Saudis may increase production to new record highs pushing near 11 million barrels per day,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.

“With the U.S. rig count coming back online for several weeks, even if a freeze did happen we would be talking about freezing at higher levels of output,” Zahir said.

Before last week’s drawdown, U.S. crude stockpiles had risen unexpectedly in three previous weeks. The U.S. oil drilling rig count has also risen without pause for seven weeks, signaling more production ahead. [RIG/U]

Reports of refinery outages in the United States, including a crude unit at Exxon Mobil Corp’s <XOM.N> 502,500 barrel per day (bpd) plant at Baton Rouge in Louisiana, added to the market’s downside. [REF/OUT]

Traders will be on the lookout for a U.S. Federal Reserve statement due at 2:00 p.m. (1800 GMT) to gauge if interest rates are to rise soon.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; editing by Jason Neely and Marguerita Choy)

As exports struggle, Israel’s economy faces slower growth

By Steven Scheer

JERUSALEM (Reuters) – For decades, Israel’s high growth was driven by exports of oranges, diamonds, pharmaceuticals and software, but the picture is changing due to weak global demand and a strong shekel.

Consumer spending is now a critical growth driver. Businesses fear factories and jobs are at risk if exports, which have declined 10 percentage points over the past decade, fall further.

“We are exporting 80 percent less than our peak” a decade ago, said Joseph Ben-Dor, chief executive of Ben-Dor Fruits & Nurseries on the Jordan River in northern Israel.

Ben-Dor, whose family started the business in 1888, said his main market is Europe, particularly Britain where his largest customers for plums and other fruits are Tesco, Marks & Spencer, Morrisons and Waitrose. He largely blames a strong shekel, rising water, labor and other costs, and government obstacles for lower sales abroad.

Diamond exports, 25-30 percent of Israel’s industrial exports, have slid 30 percent in the past few years, mainly on slower global demand, said Yoram Dvash, president of the Israel Diamond Exchange. Exports to China, a key market, have plunged 70 percent in the last 18 months.

Citing weak global growth that has hurt exports, Israel’s Finance Ministry on Wednesday lowered its economic growth forecast for 2016 to 2.5 percent from 2.8 percent and trimmed estimates through 2019.

The Bank of Israel last month cut its growth estimate from 2.8 percent to 2.4 percent for 2016 and 2.9 percent in 2017.

When exports are hot, Israel’s economy tends to grow between 4 and 5 percent a year. With flat or declining exports in 2014, 2015 and probably again this year, growth is closer to 2.5 percent, well below the average of 4.5 percent from 2004-2011.

“If the trend continues we can witness sustained private consumption growth but we will shift to a lower growth rate,” Nathan Sussman, head of research at the Bank of Israel, said. “Growth will likely be in the 2.5 to 3 percent range if it stays this way.”

With the population growing 2 percent a year, that amounts to per capita growth of just 0.5-1 percent.

NO MAGIC PILL

Ten years ago, net exports accounted for 41 percent of output. Now the ratio is 31 percent. While that tops the 13 percent in the United States and 27 percent for Europe, the decline has strained the economy.

“We need to target growth of 4 to 5 percent so if you want to reach that, you need to turn on the engine of exports,” said Shraga Brosh, president of Israel’s Manufacturers’ Association.

Brosh said the government needed to invest more in research and development and encourage small- and medium-sized factories to become more efficient through tax incentives.

Ohad Cohen, head of the Foreign Trade Administration in the Economy Ministry, said there was only so much the government could do. “We don’t have any magic pill,” he said.

Still, the ministry supports exporters with insurance guarantees and in opening new markets. In recent years, it has doubled the number of offices in Asia to 16. Asia now accounts for 22 percent of Israel’s exports, compared with 31 percent for Europe and 25 percent for the United States.

Israel plans to invest in penetrating markets in Africa and Latin America, Cohen said.

Exports excluding diamonds and start-ups are forecast to fall 1.5 percent this year after a similar decline in 2015. Much of the weakness has come from Europe, in part because the euro has lost 15 percent against the shekel since late 2014.

Another issue is that three companies – Intel, Israel Chemicals (ICL) and Teva Pharmaceutical Industries – control nearly half of industrial exports. For various reasons they have trimmed output.

Intel is shifting production to a new chip plant in Israel, while falling demand and prices for potash have weighed on ICL. Teva said its exports are “characterized with monthly and seasonal fluctuations” but are not falling on an annual basis.

Concerned by sluggish exports, the central bank continues to buy dollars to try to prevent further shekel strength. It has bought about $70 billion of foreign currency since 2008, but the shekel has not weakened enough to spur an export recovery.

(Editing by Janet Lawrence)

Global stocks outlook dims with risk aversion on the rise again: Reuters poll

By Ross Finley and Rahul Karunakar

LONDON/BENGALURU (Reuters) – Optimism about stock market performance this year has wilted, with investors fretting about the global economy and unexpected shocks likely to condemn most key indices to a weaker performance than thought just a few months ago.

The latest Reuters poll of over 250 analysts, fund managers and brokers worldwide taken June 27-July 11 also showed an intensifying pull between stretched share prices – with Wall Street at a record high – and bond markets, with most government bond yields at record lows and vast swathes of them negative.

Strategists at Citi have noted that the gap between the global government bond benchmark yield, just 0.5 percent, and the dividend yield on global equities of about 2.7 percent, is the widest in 60 years, and on that basis, stocks look attractive.

Ten of the indexes polled are expected to be lower by the end of the year when just three months ago the consensus view among forecasters was that they would be up, in some cases significantly. [Graphic: http://tmsnrt.rs/29t4c95]

But the poll results do not provide a definitive picture on where forecasters are recommending investors put their money, although hopes remain high once again that next year will be better, particularly for struggling emerging markets.

The Bank of England is set to reverse course in response to Britain’s shock vote on June 23 to leave the European Union, with rate cuts and renewed government bond purchases nearly certain in an attempt to limit the damage. [BOE/INT]

The trouble is, even though the vast majority polled don’t expect any financial crisis from Brexit, that shock has increased risk aversion, as well as the risk a likely British recession may have ripple effects well beyond its borders.

Expectations for an interest rate rise in the United States have also faded despite a surprisingly strong jobs report last week, triggering a rally in stocks and U.S. Treasuries.

So while in past years the prospect of more central bank cash might have lit a fire under the stock market, there is a clear sense now of pessimism in the latest results about the outlook for European shares, as well as Britain’s FTSE 100. [EPOLL/FRDE] [EPOLL/GB]

“The Brexit vote has damaged the outlook for the global economy and EPS (earnings per share). This is clearly unhelpful for global equities. It also drove global bond yields down to unprecedented levels, which has increased the relative income attractions of equities,” wrote Citi strategists in a note.

“These two opposing forces are likely to keep share prices trapped in the current trading range. While Citi strategists collectively forecast a 7 percent rise in global equities by mid-2017, investors could probably generate a better return if they wait for the next dip.”

Even on Wall Street, where stocks had their worst start to the year ever only to rally back to a record high, in large part on optimism about the economy, many are now cautious, especially ahead of a presidential election in November. [EPOLL/US]

“It’s Brexit one day, election issues the next. We’ve been telling clients to sort of buckle up,” said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management.

However, with increasing central bank ownership of a government bond market limited in size by fiscal restraint, stock and bond prices are likely to continue rising, simply because the money that’s been created has to go somewhere.

The European Central Bank also has both feet on the accelerator, having launched its latest aggressive expansion to its stimulus well before the Brexit vote. Now many are speculating it may have to consider doing even more to make sure the euro zone economy doesn’t veer off track as a result.

Perhaps unexpectedly, the most optimistic outlook appears to be for Japan, where stocks have been beaten down by a soaring yen and a moribund economy. [EPOLL/JP]

In addition to a much lengthier and more aggressive central bank stimulus program than in Europe, more fiscal stimulus is in the pipeline there after elections at the weekend where Prime Minister Shinzo Abe was victorious.

Indian shares are also expected to perform well on relative stability compared with other Asian economies, although forecasts are markedly less optimistic for the remainder of the year than those taken three months ago. [EPOLL/IN]

For Asia more widely, as well as Latin America, forecasters were less upbeat, looking past the U.S. presidential election and potential near-term trouble as a result of Brexit to peg 2017 for a rebound. [EPOLL/ASIA] [EPOLL/BR]

“There are likely to be more periodic sell-offs in risky assets in the months ahead, but we do not expect these to prevent EM (emerging market) stocks from performing reasonably well,” wrote David Rees, senior markets economist at Capital Economics.

“If anything, the vote for ‘Brexit’ appears likely to ensure that global monetary conditions remain looser for longer,” he wrote. “This, along with relatively low valuations, will support EM equities in the next 18 months.”

(Poll data: <EQUITYPOLL1>)

(Other stories from the Reuters global stock markets poll:)

(Additional reporting and polling from reporters in Seoul, Shanghai, Sydney, Tokyo, London, Frankfurt, Milan, Moscow, Johannesburg, New York, Brasilia, Sao Paulo, Toronto and Bengaluru; Editing by Adrian Croft)

Wall St. declines as growth worries, oil weigh

By Marcus E. Howard

(Reuters) – Wall Street stocks fell in afternoon trading on Tuesday as investors faced continued uncertainty in Europe and tumbling oil prices weighed on energy shares.

The Bank of England said the outlook for Britain’s financial stability after its June 23 vote to leave the European Union, dubbed Brexit, was “challenging” and said it would lower the amount of capital that banks were required to hold in reserve in order to allow them to keep lending.

“After a surprisingly big bounce last week, I think we’re in a little bit of a risk-off trading today – the uncomfortable feeling that maybe all is not fully well given Brexit,” said Jeffrey Carbone, senior partner, Cornerstone Financial Partners, in Cornelius, North Carolina.

Seven of the 10 major S&P sectors were lower. The energy sector <.SPNY> fell 2.4 percent. The materials index <.SPLRCM> was down 2 percent.

The financial sector <.SPSY> was down 1.9 percent with JPMorgan <JPM.N>, Wells Fargo <WFC.N> and Citigroup <C.N> falling between 2.4 and 3.8 percent.

Oil prices <LCOc1> <CLc1> also slipped more than $2 per barrel as a potential economic slowdown weighed on prospects for demand.

Tepid U.S. data added to overall growth worries. Data showed new orders for U.S. factory goods fell in May on weak demand for transportation and defense capital goods.

New orders for manufactured goods declined 1.0 percent after two straight months of increases, according to the U.S. Commerce Department.

At 2:20 p.m. (1820 GMT), the Dow Jones industrial average <.DJI> was down 130.39 points, or 0.73 percent, to 17,818.98, the S&P 500 <.SPX> had lost 17.28 points, or 0.82 percent, to 2,085.67 and the Nasdaq Composite <.IXIC> had dropped 50.52 points, or 1.04 percent, to 4,812.04.

Investors have been seeking safe-haven assets in an uncertain economic environment. Weak data from China added to the nervousness stemming from Britain’s vote to leave the EU.

Data from China showed services sector activity hit an 11-month high in June but a composite measure of activity including manufacturing fell to its lowest in four months.

Tesla’s <TSLA.O> shares fell 1.8 percent to $212.67 after the electric car maker missed vehicle delivery targets for the second consecutive quarter.

Netflix <NFLX.O> rose 0.8 percent to $97.45 after it reached an agreement with Comcast <CMCSA.O> for its services to be available on the cable company’s set-top box. Comcast was down 1 percent at $64.60.

Declining issues outnumbered advancers on the NYSE by 2,267 to 742, for a 3.06-to-1 ratio on the downside; on the Nasdaq, 2,075 issues fell and 717 advanced for a 2.89-to-1 ratio favoring decliners.

The S&P 500 posted 66 new 52-week highs and one new low; the Nasdaq recorded 61 new highs and 29 new lows.

(Additional reporting by Yashaswini Swamynathan and Tanya Agrawal in Bengaluru; Editing by Don Sebastian and James Dalgleish)

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