By Georgi Kantchev
U.S. stocks opened lower Monday as investors weighed political developments from trade to Brexit against corporate earnings that have so far proved resilient amid signs of a world economic slowdown.
The S&P 500 fell 0.8% in the opening minutes of trading, while the Dow Jones Industrial Average lost 262 points, or 1%. The tech-heavy Nasdaq Composite Index fell 1.3%.
In Europe, the Stoxx Europe 600 fell 0.6%, following a mostly downbeat session in Asia.
After kicking off the year with a broad rally on signs of progress in the U.S.-China trade battle and dovish comments from Federal Reserve officials, investors facing key tests this week, including the latest round of trade negotiations, U.S. government talks over border security and the next U.K. parliamentary votes on Brexit. Investors are also awaiting the outcome of the latest Fed policy meeting, which is due to conclude Wednesday.
"Politics is an important driver for markets right now," said Ann-Katrin Petersen, investment strategist at Allianz Global investors. "More volatility is in store for markets especially given the slower growth outlook for the global economy."
Lackluster economic data out of China and the eurozone in recent weeks have painted a picture of a decelerating global activity, which analysts at Barclays say sits at odds with the 10% rally in global equities over the past month.
"Business activity continues to be negatively affected by the ongoing U.S.-China trade and Brexit uncertainty, alongside weakening euro area domestic demand, waning U.S. fiscal stimulus, and the temporarily suspended U.S. government shutdown," the bank wrote in a report to clients.
The U.S. government reopened Friday following a 35-day partial shutdown but President Trump told The Wall Street Journal Sunday that there is a "less than 50-50" chance of a congressional border deal before the next government-funding lapse in less than three weeks.
A slew of earnings was another focus for investors, with closely watched Silicon Valley firms including Apple, Amazon.com, Microsoft and Facebook reporting later this week.
Slightly more companies than usual have beaten analysts' earnings estimates so far, providing a source of support for the market. Around 72% of companies have reported above analyst expectations, compared with an average beat of 64%, according to data from Refinitiv. The bar is significantly lower, however, after steep downgrades to fourth-quarter and 2019 earnings forecasts in recent weeks.
The Fed will release its latest policy statement Wednesday but with no major changes expected, traders will focus on Chairman Jerome Powell's press conference. Fed officials have recently indicated that they will be patient in raising interest rates, providing support for markets.
"Investors think the Fed will stay where it is for now which is positive for sentiment," said Craig Callahan, president of investment firm Icon Advisers.
In currencies on Monday, the WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.1%. The 10-year U.S. Treasury yield rose slightly to 2.757% from 2.762% Friday. Yields move inversely to prices.
In Europe, traders were looking to the latest moves on the U.K.'s exit from the European Union. The British parliament is scheduled to vote on U.K. Prime Minister Theresa May's "Plan B" for Brexit to parliament on Tuesday after lawmakers earlier this month soundly rejected her initial deal with the EU.
The British pound was trading down 0.4% against the U.S. dollar.
"The outcome of tomorrow's vote and its implications for the Brexit debate remain uncertain...some position paring is still possible," analysts at UniCredit said in a note to clients.
Shares in Russian aluminum producer Rusal rallied by 9% in Hong Kong after the U.S. Treasury Department on Sunday removed the company from its sanctions list. The move came after blacklisted billionaire Oleg Deripaska delivered on a promised plan to divest his majority ownership stake, the Treasury said.
In Asia, Japan's Nikkei finished down 0.6% while Hong Kong's Hang Seng Index was flat.
In commodities, Brent crude, the global oil benchmark, was down 1.7% amid the political turmoil in oil-rich Venezuela.
Write to Georgi Kantchev at firstname.lastname@example.org