Last checked at 
By Mike Dolan
LONDON, Nov 20 (Reuters) - Not all’s rosy in the garden.
Record-high world stock markets stepped back from their latest
peaks on Wednesday, fearful that the year-end rally had assumed
a U.S.-China trade deal that’s far from guaranteed. A drop in
oil prices, poor U.S. retail earnings, declining Japanese
exports and an equivocal reaction to the UK election’s first
live TV debate all added to a note of caution on Wednesday.
The ebb and flow of optimism about a trade agreement between
Washington and Beijing has become a fact of life, but sentiment
surrounding the negotiations still packs a punch – not least
with markets "priced for perfection" the way they have been and
the assumption that a global recession will be avoided next year
only with a significant truce. The latest obstacle to a deal is
the U.S. Senate’s approval on Tuesday of a bill supporting human
rights in Hong Kong amid a crackdown on a pro-democracy protest
movement there – a decision that drew angry condemnation from
Beijing. Earlier, U.S. President Donald Trump insisted he would
raise tariffs on Chinese goods even higher if no deal is
forthcoming. Two people briefed on the talks said Trump has
decided that rolling back existing tariffs, in addition to
canceling a scheduled Dec. 15 imposition of tariffs on some $156
billion in Chinese consumer goods, requires bigger concessions
from China, according to Reuters reports.
The result was a brake the recent surge in world stocks.
Wall Street indices ended lower overnight, weighed down by a
near 20% drop in shares of the department store Kohl’s and a
drop of more than 5% in retailer Home Depot following poor
earnings updates and guidance from both. Brent crude also
dropped to it lowest price since Nov. 1, just above $60 a
barrel, after data showed a glut in inventory was rebuilding
even as Russia indicated it was reluctant to consider deeper
supply cuts. U.S. 10-year Treasury yields fell below 1.80% to
their lowest level since the Nov. 1, dragging the yield curve
between three months and 10 years back below 20 basis points to
its flattest level of the month. Adding to caution overnight was
data that showed Japanese exports plunged 9.2% year-on-year in
October, below forecasts, and the pace of contraction was
accelerating. The data was distorted somewhat by base effects
related to spike in the same month last year, but nevertheless
underlined the damage done by a year of trade wars. Japan’s
Nikkei225 index lost 0.6% and the yen weakened.
The darker mood surrounding the trade talks took 0.7% off
both Shanghai's and Hong Kong’s benchmarks and Seoul’s Kospi
lost more than 1%. China’s offshore yuan weakened. U.S. stock
futures were down about 0.25%. The dollar was higher against
both developed- and emerging-market currencies. Sterling edged
down, with markets now assuming a election majority for PM Boris
Johnson’s Conservatives is already about 70% priced in and
leaving the market a little more vulnerable to any shift in the
opinion polls. The first TV debate between the two leaders of
the biggest parties was considered a draw, and a YouGov poll for
the Times newspaper from late Tuesday showed the Conservative
lead over Labour narrowing to 12 points. Canada's dollar fell to
its lowest since Oct. 11 in early London trading after a speech
by the Bank of Canada’s senior deputy governor boosted the
perceived chances of an interest rate cut there.
In European corporate news, Wirecard was set to come under
renewed selling pressure after German business newspaper
Handelsblatt reported auditor EY refused to sign off on the
Singapore audit of Wirecard for 2017, citing irregularities. Its
shares were down 7.7% in early Frankfurt trade. In the UK, home
improvement retailer Kingfisher was expected to open 5% lower
after it reported another decline in underlying sales in the
latest quarter. Fevertree Drinks was seen falling 5% after the
premium tonic water maker said it was still being hurt by slack
consumer spending in Britain.
* Europe corp events: Inmarsat, United Utilities, Investec,
Sage;
Kingfisher trading, Direct Line trading
* Germany Oct producer prices
* Riksbank Financial Stability Report
* UK Q3 labour productivity
* European Central Bank chief economist Lane speaks in
Milan;
Irish central bank chief and ECB policymaker Makhlouf gives
first public speech as governor in Waterford; Finland’s central
bank chief and ECB policymaker Rehn speaks in Helsinki
* EU Commission to issue opinions on 2020 draft budgets of
euro
zone states
* South Africa Oct inflation
* Russia Oct jobless, retail sales, wages
* Ghana central bank policy decision
* Canada Oct inflation
* FOMC minutes released
(Editing by Larry King)
