A gauge of global equities headed for its seventh consecutive month of gains on Tuesday, but stocks and the dollar traded flat on the day as weak economic data suggested slower growth ahead as investors await a U.S. jobs report at week’s end.
U.S. consumer confidence fell to a six-month low in August as soaring COVID-19 infections and rising inflation dampened the economic outlook, a view that data from China, Canada and the EU to a degree also suggested.
China’s businesses and the broader economy came under increasing pressure in August as factory activity expanded at a slower pace and the services sector slumped into contraction. In Canada, the economy unexpectedly shrank 1.1% in the second quarter on an annualized basis.
Euro zone inflation surged to a 10-year-high in August with further rises likely, which markets mostly shrugged off as the European Central Bank’s narrative of temporary inflation and ultra-easy policy for years remained intact.
The Delta variant has cast a shadow on U.S. consumer optimism, which had soared earlier in the year on expectations vaccines would enable a return to normalcy, said Jim Bard, chief investment officer at Plante Moran Financial Advisors.
“Consumers are increasingly aware of the near-term risks to the economic recovery created by rising prices and the COVID-19 resurgence,” Baird said in a note. He added confidence remains relatively high and consistent with solid consumer spending.
MSCI’s all-country world index traded up 0.13%, on track for another closing record high and its seventh month of consecutive gains. In Europe, the broad STOXX Europe 600 index closed down 0.45%.
On Wall Street, stocks edged up from early declines. The Dow Jones Industrial Average rose 0.09% and the S&P 500 added 0.02%, while the Nasdaq Composite slipped 0.11%.
Stocks in emerging markets jumped, with MSCI’s EM index rising 1.66%.
Value and growth stocks were about even, a change from Monday when technology shares jumped after Federal Reserve Chair Jerome Powell indicated interest rates would remain low well past the beginning of the Fed’s bond-purchasing program.
The dollar slipped its lowest level in more than three-weeks against a basket of currencies as investors await jobs data on Friday for clues into the possible path of Fed monetary policy. The greenback later pared losses to trade little changed.
“Powell offered no concrete taper signals and made it clear that the Fed was in no rush to raise interest rates, despite the recent spike in inflation,” said Lukman Otunuga, Senior Research Analyst at FXTM.
The dollar index rose 0.035% to 92.741, while the euro was remained unchanged at $1.1795. The yen traded up 0.05% at $109.9800.
U.S. Treasury yields rebounded after earlier easing a bit following the U.S. consumer confidence data. The benchmark 10-year yield rose 1.8 basis points to yield 1.302%.
Benchmark German bond yields rose to the highest in more than five weeks on after the higher-than-expected inflation reading and an ECB policymaker called on the bank to reduce its emergency bond purchases as soon as the next quarter.
Germany’s 10-year bund yield, the benchmark for the euro zone, rose 5.7 basis points to -0.379%.
Oil slipped as the Organization of Petroleum Exporting Countries and its allies geared up for a meeting on Wednesday amid calls from the United States to pump more crude, though Brent still traded well above $70 a barrel.
Brent futures were last down $0.26 at $73.15 a barrel. U.S. crude fell $0.07 to $69.14 per barrel.
CHINA CONCERNS
Chinese shares endured another volatile session after disappointing economic readings and renewed worries about regulatory clampdowns.
Tech indices and stocks fell again after Beijing on Monday cut the amount of time players under the age of 18 can spend on online games to one hour on Fridays, weekends and holidays.
The CSI information technology sub-index dropped 1.86%. The ChiNext Composite start-up board was 1.76% weaker and Shanghai’s tech-focused STAR50 index fell 2%.
Asian shares overnight broadly recovered. MSCI’s gauge of Asia Pacific stocks outside Japan was up 1.4%, while Japan’s Nikkei 225 bounced back to stand 1.1% higher despite weak July industrial output data.
– Reuters