Asian shares, U.S. stock futures slip as growth worries loom

SYDNEY (Reuters) – Asian shares and U.S. stock futures slipped on Tuesday amid signs of pessimism about world growth, while sterling dithered as the latest plan for Brexit appeared to come and go with no progress.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.1 percent but was still within striking distance of a seven-week top touched the previous day.

Japan’s Nikkei .N225 gained 0.2 percent, helped by a recent pullback in the yen.

U.S. stock futures, which offer an indication of how Wall Street will open, were down about 0.2 percent. ESc1 1YMc1 NQc1

U.S. markets were closed on Monday so trading was generally subdued overnight. However, equity prices in Europe and Latin America were hit after data showed a slowdown in growth in China, the world’s second biggest economy.

Adding to the air of caution and uncertainty, the International Monetary Fund trimmed its global growth forecasts and a survey showed increasing pessimism among business chiefs as trade tensions loomed.

The gloomy IMF forecasts, released on the eve of the World Economic Forum in Davos, Switzerland, highlighted the challenges facing policymakers as they tackle an array of actual or potential crises, from the U.S.-China trade war to Brexit.

“This is now the second IMF downgrade in a row,” ANZ analysts wrote in a morning note.

“And while there have been some positive developments in recent weeks, risks remain skewed towards weaker growth, with a ‘no deal’ Brexit and sharper-than-expected slowdown in China getting special mentions.”

“Between the ongoing US/China negotiations and the UK’s Brexit impasse, market sentiment will continue to be dominated by geopolitics in the near term,” ANZ added.

In a sign of risk aversion, the Australian dollar AUD=D3, often used a liquid proxy for China investments, nudged down to $0.7155, putting it on track for a third straight sessions of losses.

Sterling traded cautiously as British Prime Minister Theresa May refused to rule out a no-deal Brexit. There are few signs she can break a deadlock with parliament after her Brexit deal was rejected last week.

May offered to tweak her defeated deal by seeking further concessions from the European Union on a backup plan to avoid a hard border in Ireland.

The pound fell initially as she spoke, then climbed to session highs, rising above $1.2912 GBP=D3. It was last at $1.2890.

“Prime Minister May’s update to Parliament on how to proceed with Brexit contained little new,” the ANZ analysts wrote.

“The strategy appears to be one of running down the clock into Brexit and it raises the probability of growing support for amendments by MPs to prevent a ‘no deal’.”

The dollar JPY= held at 109.63 against the Japanese yen while the euro was near the floor of its recent trading range at $1.1375 EUR=. Against a basket of currencies, the dollar was flat at 96.336 .DXY.