Wall Street rally on pause as stocks fall

LONDON — Wall Street's record rally petered out on Wednesday, and stocks elsewhere slid as the banning of China Telecom from the United States and Germany's growth outlook downgrade weighed on sentiment.

Both the Dow and S&P 500 edged up at the opening bell from their record closes, but then fell back.

"The restraint is owed partly to a belief that the stock market seems ripe for a consolidation period after a huge move this month," said Briefing.com analyst Patrick J. O'Hare.

"The lacklustre action yesterday — after more good earnings news — was a testament to that belief," he added.

Wall Street, and global markets generally, have rebounded from drops in September when investors took fright at surging inflation and the prospect of tighter monetary policy.

A strong corporate earnings season has provided some much-needed support to investors in recent weeks as companies showed resilience in the face of supply snarls, surging commodity and wage costs, as well as spiking COVID-19 cases.

But long-running friction between Washington and Beijing continues to cast a dark shadow over trading floors, with the two sides locked in a stand-off over a range of issues including Taiwan, national security, technology, trade and Hong Kong.

China Telecoms ban 

Focus was also on the tech sector after the US Federal Communications Commission cancelled the operating licence of China Telecom's US unit on Tuesday, saying it "raised significant national security and law enforcement risks".

The move came after a clampdown by former US president Donald Trump on other giants including Huawei and China Mobile.

It "seems to dampen previous hopes that the US-China relations may be turning for the better", said Jun Rong Yeap of IG Asia.

Most of the rest of Asia was also in the red as a forecast-beating jump in Australian core inflation added to broad fears about soaring global prices.

Investors are also keeping tabs on the crisis in China's property sector with several developers struggling to meet their debt obligations, while industry giant Evergrande faces a new deadline at the end of the week to avoid a default.

In Europe, a downgraded government growth forecast of 2.6 per cent for Germany this year, largely owing to bottlenecks in global supply chains, dampened sentiment.

The Frankfurt DAX fell 0.3 per cent and in Paris the CAC shed 0.2 per cent.

Meanwhile, the British government upgraded its 2021 growth forecast to 6.5 per cent as it unveiled a budget but failed to help London stocks, with the FTSE 100 dropping 0.3 per cent.

Oil markets slid Wednesday as data showed a big gain in US inventories of crude and petrol.

"The question being asked is have we reached the potential tipping point that might trigger demand destruction?" said CMC Markets analyst Michael Hewson.

Crude prices have been striking multiyear highs on expectations of surging demand and concerns over supplies.

All eyes will be on the European Central Bank on Thursday when it updates its monetary policy amid expectations that major central banks will begin winding down their huge cash stimulus injections and raise interest rates before the end of the year as the economy recovers and inflation surges.