World growth worries give stocks
lackluster June start
Send a link to a friend
[June 01, 2016]
By John Geddie and Sujata Rao
LONDON (Reuters) - Global equity markets
started the new month on the back foot on Wednesday, undermined by
lackluster economic data and an oil price slide that took the edge off
energy and mining shares.
The pan-European FTSEurofirst 300 and the STOXX Europe 600 both
fell more than 1 percent, led by the resources sector, while U.S.
equity futures pointed to a weak opening for Wall Street.
The catalyst for the moves lower was Chinese manufacturing data that
showed the economy still struggling to regain traction, while euro
zone factory growth languished at a three-month low.
Oil slid more than 1 percent too, hurting resources stocks and risk
appetite in general. The MSCI world index, which tracks shares in 45
countries, shed 0.2 percent, pulling away from a one-month high hit
earlier this week.
Markus Huber, a trader at the City of London Markets brokerage, said
equities were also seeing follow-through selling after disappointing
U.S. data on Tuesday.
"Furthermore, several (factory) data readings out of China overnight
painted only a mixed picture possibly indicating that economic
growth momentum is already in the process of slowing again," Huber
added.
Wall Street suffered a reversal late on Tuesday when soft readings
on consumer confidence and Midwest manufacturing eclipsed strong
retail sales indicators, and raised worries that recovery was again
stuttering in the world's biggest economy.
The risk off mood boosted safe-haven government bonds, with
Germany's 10-year yield falling to within 10 basis points of record
lows. U.S. Treasury yields slipped a touch after falling from
multi-week highs late on Tuesday [US/].
DOLLAR, DATA
The dollar floundered against the yen and the euro as the data
prompted investors to reconsider the most likely timing of the Fed
move - they now price a 22.5 percent probability of a rate move in
June, down from around 32 percent factored in a few days back,
according to the CME Group FedWatch program.
Much now depends on the upcoming manufacturing survey from the
Institute of Supply Management (ISM), with a weak reading further
eroding chances of a June rate hike. The Fed will also release its
Beige Book report on business activity at 1800 GMT (2.00 p.m. ET).
"We are looking at the ISM and what the Fed says in the Beige Book
today and if they deliver a surprise or a positive outlook, I would
expect markets to price in more than they currently are in terms of
a June rate hike," said Daniel Lenz, a strategist at DZ Bank.
[to top of second column] |
A worker shelters from the rain as he passes the London Stock
Exchange in the City of London at lunchtime October 1, 2008.
REUTERS/Toby Melville/File Photo
The dollar fell almost 0.4 percent against a basket of currencies,
pulling away from two-month highs set on Monday, while against the
yen it slipped around 1 percent, pulling away from a one-month peak
of 111.455 set on Monday.
The Japanese currency was boosted by an announcement that a planned
sales tax hike would be delayed.
However, the Chinese yuan approached a five-year low against the
dollar after the central bank fixed the exchange rate midpoint lower
for the third straight day, adding to fears that authorities saw the
need for currency weakness to offset weaker growth.
Politics is also an issue in many parts of the world, weighing
especially on sterling which hit a two-week low of $1.4439 against
the dollar, adding to Tuesday's 1 percent losses.
The moves were driven by latest polls that showed the percentage of
voters supporting leaving the European Union may be increasing ahead
of the June 23 referendum [GBP/].
"With the referendum three weeks from tomorrow, the pound could come
under increasing downward pressure as the 'Leave' camp regains
momentum," James Reddiman, director at FX consultancy Audere
Solutions, said.
(Additional reporting by Sujata Rao, Atul Prakash and Dhara
Ranasinghe; Editing by Robin Pomeroy)
[© 2016 Thomson Reuters. All rights
reserved.]
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
|