Stocks bulls slow their charge, dollar near one-month
lows
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[September 02, 2021] By
Marc Jones and Wayne Cole
LONDON (Reuters) - Record-high world stocks
slowed their charge on Thursday as concerns grew over the Chinese
economy after a run of soft data, while the risk of a sub-par U.S.
payrolls report kept the dollar on the defensive.
A raft of Asian manufacturing surveys overnight had suggested supply
bottlenecks were still tightening, while in Europe, Spanish unemployment
fell Swiss GDP data disappointed and Hungary reported producer price
inflation running at an eye-watering 14.8%.
The pan-European STOXX 600 index crawled up 0.3%supported by travel,
oil, car and chemicals companies [.EU] although signs of slowing global
growth and a ninth day in the last 10 of gains for the euro limited the
rises.
"The market seems to be believing Fed policymakers at the moment that
inflation is transitory," Legal & General Investment Management
portfolio manager Justin Onuekwusi said, referring to signals that the
U.S. central bank will remove stimulus very gradually.
"That implies a lower-for-longer (interest rate) environment" he added,
which benefits markets, especially technology stocks which have the most
growth appeal.
In Asia, the uncertainty over still-low vaccination rates in many ASEAN
economies and China's zero-tolerance COVID-19 strategy had kept Chinese
blue-chips flat, though speculation about more fiscal stimulus offered
some support.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.1%
from a five-week high. Japan's Nikkei added 0.3%, South Korea fell 1%,
whereas Hong Kong's battered tech index enjoyed a fourth day of unbroken
gains.
Nasdaq futures and S&P 500 futures were starting to creep up too, having
risen again on Wednesday despite some late wobbles. [.N]
Wall Street has been preoccupied with second-guessing U.S. August jobs
data due out on Friday, with the task made all the more uncertain by a
disappointing reading on ADP private payrolls but a solid ISM survey of
manufacturing.
Median forecasts are for a strong rise of 750,000 jobs, but they range
from 375,000 to 1.02 million with the ADP report prompting speculation
the risks are to the downside.
A soft non-farm payrolls number could be positive for risk assets,
however, since it would lessen pressure for early tapering from the
Federal Reserve.
"A print closer to 400k rather than 800k effectively means that the
Fed's condition of "further substantial progress" in the labour market
will take longer to materialise, thus delaying the tapering decision
from September to November," said Rodrigo Catril, a senior FX strategist
at NAB.
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A photographer takes
pictures of traders before the opening of the German stock exchange
in front of the empty DAX board, at the stock exchange in Frankfurt,
Germany, June 24, 2016. REUTERS/Staff/Remote
"Bad news in the labour market are good news for risk assets given the punchbowl
will remain well liquefied for a bit longer."
Global covid cases
To view the graphic, click here:
https://fingfx.thomsonreuters.com/
gfx/mkt/dwpkrrmkqvm/Pasted%20image%201630571383629.png
ECB HAWKS SWOOP
Amid the jobs chatter, 10-year Treasury yields eased back under 1.30% and away
from the recent top of 1.375%, while the U.S. dollar index touched a one-month
low.
The euro also reached its highest since early August at $1.1856 and was last
steady at $1.1845.
The single currency was aided by hawkish comments from German central bank chief
Jens Weidmann, who cautioned against inflation risks and called for a slowdown
in the European Central Bank's bond buying. ECB policymakers meet next week.
In contrast, the Bank of Japan shows no sign of tapering its massive purchases
as the economy remains mired in a decades-long battle with deflation.
That all helped keep the dollar firm at 110.00 yen and comfortably within the
tight 108.71 to 110.79 range that has lasted for the past two months.
Commodities would likely benefit from any delay in Fed tapering, helping
underpin gold at $1,812 an ounce but short of resistance around $1,823.
Oil prices eased after OPEC+ agreed to stick to a policy of adding 400,000
barrels per day a month to the market, though it also defied pressure for an
even larger increase. [O/R]
"Ignoring calls from the White House for further barrel increases, we think that
OPEC+ will stay on this current course unless there is a clear deterioration in
the demand outlook," said analysts at RBC Capital Markets in a note.
"Moreover, we reiterate that if there is a price bias for the majority of the
OPEC+ membership, it is to the upside given the high fiscal breakevens of member
states."
Brent regained some traction in London trading to sit at $71.60 a barrel, while
U.S. crude bobbed around $68.50.
(Additional reporting by Sujata Rao in London; Editing by Catherine Evans)
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