Shares start month on a high as PMIs point to economic rebound
Reuters
Published Aug 31, 2020 08:22PM ET
Updated Sep 01, 2020 04:45AM ET
LONDON (Reuters) - Stocks started September on a positive note, with global indexes close to all-time highs and Europe edging higher, pushed up by Chinese factory data that showed a rebound in demand.
Factory activity in China expanded at the fastest rate in nearly a decade in August, a private PMI survey showed on Tuesday, contrasting with an official survey on Monday that showed output in the country's factories grew slightly more slowly last month as floods hit the southwest.
Both surveys pointed to improving export orders.
The MSCI world equity index, which tracks shares in 49 countries, was close to its highest ever, while the pan-European Stoxx 600 was up 0.2% at 0809 GMT.
France's Cac 40 was up 0.4% and Germany's Dax was up 0.6%. Britain's FTSE 100 lagged, down 0.9%.
European stocks had opened even higher but pared gains after the German government revised down its GDP forecast for 2021.
PMI data from across Europe showed manufacturing activity generally on the path to recovery though factory managers are wary about investing and hiring more workers.
In Germany, Europe's largest economy, output grew at its fastest pace since February 2018, while in France it contracted.
The euro zone economy has experienced a strong recovery in the third quarter even though the most recent incoming data have been less robust, European Central Bank Vice President Luis de Guindos said.
The euro rose to a two-year highs of $1.19975 at 0324 GMT. At 0800 GMT it was at $1.199, up 0.4% since New York's close, as a dollar sell-off continued.
Versus a basket of currencies the dollar was down 0.4% at 91.8811 at 0810 GMT, dropping below 92 for the first time since May 2018.
Investors are betting on U.S. rates staying lower for longer after Federal Reserve Chair Jerome Powell on Thursday outlined an accommodative shift in the central bank's approach to inflation.
Euro zone inflation data for August is due at 0900 GMT and is expected to show a decline to 0.2%, according to a Reuters poll.
Commerzbank (DE:CBKG) analyst Esther Reichelt said inflation data highlights the difference between the Fed and the ECB.
"Whereas the market considers the Fed capable of rekindling inflation rates by leaving interest rates lower for longer than previously assumed, this does no longer seem to be the case as far as the ECB is concerned," she wrote in a note to clients.
"Inflation data for August published today will once again underline by how much the ECB will miss its inflation target.
"Just as higher inflation is damaging for the dollar, the euro is benefiting from lower inflation – if monetary policy is unwilling (or unable) to do anything against it."
Paul Donovan, chief economist at UBS Global Wealth Management said Tuesday's data was likely to have limited impact because "markets are convinced interest rates will remain low for longer, and price data is unlikely to change that."
Get The News You Want
Core euro zone bond yields were up around 1 to 2 basis points, with the benchmark German 10-year yield at -0.386%.
Oil prices gained, reversing overnight losses.
Brent crude futures climbed 57 cents to $45.85 a barrel at 0805 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 56 cents to $43.17 a barrel.
Gold prices also rose, to their highest in two weeks.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.