Global stocks struggle higher as PMIs weigh

Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai

LONDON (Reuters): Global stock markets enjoyed cautious gains on Friday, taking their cue from Wall Street tech shares, but tepid economic data and lofty valuations reined in the advances in the wake of huge rally that has wiped out coronavirus losses.

Global stocks advanced 0.2% while the pan-European STOXX 600 climbed 0.4% after healthy gains in Asian-Pacific bourses in the wake of US tech shares closing higher on Thursday, shrugging off some sombre unemployment data in the world’s top economy.

European stock markets also looked beyond fresh numbers painting a muted economic outlook with purchasing managers’ index releases from France and Germany as well as the wider euro zone falling short of expectations, flagging a slowing momentum in the recovery. 

“European stocks shrug off faltering flash PMIs,” said Michael Hewson, chief market analyst at CMC Markets.

“The latest flash PMI data for August in France and Germany would appear to point to a plateauing in economic activity, particularly in the services sector, where rising infection rates here could well be tempering economic activity on the margins.”

A stronger pound weighed on UK’s export-heavy FTSE 100. Meanwhile US futures pointed to a flat open.

The S&P 500 has rallied 54% from its March low in a world awash with monetary and fiscal stimulus, but money managers are questioning the future trajectory.

“We think equity markets, certain credit markets, and the US dollar have yet to fully reflect the long-term impact of ultra-loose Fed policy,” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management 

Overnight, clouds returned to the US labour market outlook, with weekly jobless claims back over a million to put the total number of Americans on unemployment benefits at 28 million.

The Philadelphia Federal Reserve’s business index also missed expectations and together the weak readings pushed down nominal US yields and dragged on the dollar. Benchmark US 10-year debt yields were last steady at 0.6461%.

In currency markets, the euro inched higher to sit at $1.1838 with the dollar weighed down by concerns over the strength of a US economic recovery in the wake of the jobs data.

A bounce in the greenback after Federal Reserve minutes that fell short of dovish market expectations wore off fairly quickly and the dollar looked set for a ninth consecutive weekly loss against a basket of currencies.

The Japanese yen inched up to 105.59 after an inflation miss supported real yields while China’s yuan surged to a seven-month high as traders bet on Chinese growth. Meanwhile sterling sat flat against the dollar to sit at $1.3222.