Markets steady as weak data offset US-China optimism
Hong Kong stocks rallied more than one percent as investors focused on the China-US trade talks instead of historic violent protests that hit the city over night (Anthony WALLACE)
London (AFP) – Financial markets steadied Tuesday after the previous day’s rallies for stocks and oil prices, as global economic weakness offset optimism for planned China-US talks on resolving their trade war.
The exception was Hong Kong’s main stocks index, which rallied as dealers returned from a long weekend to play catch-up, with overnight violent protests in the city appearing to have had little effect on sentiment.
The dollar dropped against the euro and the yen but was up versus the pound.
Sterling continued a recent poor run after data showed UK construction contracted at its fastest rate in a decade.
The Markit/CIPS construction PMI slumped to 43.1 in June, from 48.6 in May. A figure below 50 marks contraction.
“The plunge in the construction PMI to its lowest level since April 2009 is a worrying sign that the damage wrought by Brexit uncertainty is building,” noted Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Across the Atlantic, the closely watched Institute for Supply Management’s nationwide manufacturing index in the US fell to its lowest level in almost three years in June, hit by weak overseas demand with factories reluctant to produce stock they may not be able to sell.
And while an agreement between US President Donald Trump and Chinese counterpart Xi Jinping to revisit trade talks provided some much-needed relief for markets — and sent the S&P 500 to a new high on Wall Street Monday — key questions remained unresolved, including on tech trade and intellectual property.
Observers said weak economic data could put further pressure on central banks to provide support to economies with fresh stimulus.
Australia’s central bank on Tuesday lowered the cost of borrowing for the second-straight month, bringing interest rates to a new historic low.
The Reserve Bank of Australia announced it had cut rates by another 25 basis points to one percent after a regular policy meeting, but the country’s dollar currency managed to still rise against the greenback.
The Federal Reserve is meanwhile widely tipped to cut interest rates at its next policy meeting this month and the release of a US jobs report Friday will be closely followed as a weak reading could boost the case for a big reduction.
“Stocks may see the next catalysts stem from deteriorating economic data that will support the arguments for the Fed to deliver a stronger commitment to easing and for the other major central banks to step up their efforts,” said OANDA senior market analyst Edward Moya.
Elsewhere on Tuesday, oil prices retreated slightly, after strong gains thanks to the Trump-Xi agreement and news that Russia and Saudi Arabia had agreed to prolong crude output cuts.
– Key figures around 0945 GMT –
London – FTSE 100: UP 0.5 percent at 7,534.19 points
Paris – CAC 40: DOWN 0.1 percent at 5,563.10
Frankfurt – DAX 30: DOWN 0.2 percent at 12,502.12
EURO STOXX 50: DOWN 0.1 percent at 3,495.75
Tokyo – Nikkei 225: UP 0.1 percent at 21,754.27 (close)
Hong Kong – Hang Seng: UP 1.2 percent at 28,875.56 (close)
Shanghai – Composite: FLAT at 3,043.94 (close)
New York – Dow: UP 0.4 percent at 26,717.43 (close)
Euro/dollar: UP at $1.1299 from $1.1283 at 2050 GMT
Dollar/yen: DOWN at 108.22 yen from 108.44
Pound/dollar: DOWN at $1.2615 from $1.2637
Brent North Sea crude: DOWN 21 cents at $64.85 per barrel
West Texas Intermediate: DOWN six cents at $59.03 per barrel
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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.