Firm U.S. stock index futures also gave investors little appetite for riskier assets, although oil jumped more than 1% as tight supply came back into focus as Saudi Arabia floated the idea of OPEC+ production cuts. . read more While the S&P flash Composite Purchasing Managers’ Index (PMI) of business activity in Europe was not as bad as feared, analysts said there was likely to be more gloomy news for the economy given the way natural gas prices have soared to record highs ahead of winter. read more Sign up now for FREE unlimited access to Reuters.com Register The MSCI world stock index (.MIWD00000PUS) fell 0.3%. The STOXX (.STOXX) index of European shares fell 0.4 percent, having fallen for nearly a week. It is now about 11% off its record high on Jan. 4, as the war in Ukraine pushed up inflation and prompted central bank interest rate hikes to dampen growth. Benchmark natural gas prices in the European Union rose 13% overnight to a record high, having doubled in just a month and are 14 times higher than the average over the past decade. Europe braced for another disruption in energy supplies from Russia. read more “I can’t see the war in Ukraine ending anytime soon, this would be the catalyst for a market rally. This will keep pressure on energy prices and for the euro, the only way is down,” said Michael Hewson, Head of Markets at CMC Markets. Stocks had begun to recover on bets that the US Federal Reserve will “turn” next year away from its bullish course. But despite signs that US inflation is peaking, markets now expect the Fed to remain hawkish when its chairman Jerome Powell speaks at the world bank’s annual meeting of central banks in Jackson Hole. At last year’s meeting, central bankers wrongly predicted that inflation would be a temporary blip, but price increases were higher, longer-lasting and more broad-based, said Monica Defend, head of the Amundi Institute. Markets are betting on the Fed raising interest rates by 75 basis points next month, when the European Central Bank and the Bank of England are also expected to raise benchmark rates. Defend said that while the company’s earnings have shown some resilience, margins will come under pressure later this year. The euro, which is trading at $0.9920 against the dollar, is expected to fall further to $0.9600 by December given Europe’s poorer outlook, Defend said. “The US and the eurozone are on two different paths,” he said. Euro falls to 20-year lows against strong dollar Sterling moved off 2-1/2-year lows against the dollar after PMI for Britain showed business activity slowed in line with expectations. read more S&P 500 and Nasdaq futures were flat after Monday’s sharp selloff on Wall Street. PMIs for the United States expire shortly after the stock market opens.
CHINA CONCERN
Asian shares fell for a seventh straight session on Tuesday, after a fresh rise in energy prices in Europe fueled recession fears and pushed bond yields higher while pushing the euro to 20-year lows. Worry about China’s economy continued to creep in as a cut in lending rates and talk of a new round of official loans to property developers underscored pressures on the sector. “Growth in the services sector looks unlikely to accelerate much as long as China’s zero-Covid-19 policies remain in place; the pandemic-linked export boom is coming to an end; and power shortages due to droughts in places of the country look set to hobble the industry in the short term,” said Oliver Allen, market economist at Capital Economics. Chinese blue chips (.CSI300) fell 0.5%, while the yuan fell to a near two-year low. The Nikkei (.N225) lost 1.2% after a PMI survey showed factory activity in Japan slowed to a 19-month low in August. read more Ten-year yields last traded at 3.01%, up nearly 50 basis points from early August lows. Recurrence to US assets The rising dollar and yields lifted gold, which traded at $1,736 an ounce after hitting a three-week low overnight. Oil prices rose as Saudi Arabia warned that the OPEC+ producer alliance could cut output. Brent rose 1.5 percent to $97.92, while U.S. crude rose 1.75 percent to $91.96 a barrel. Sign up now for FREE unlimited access to Reuters.com Register Report by Huw Jones and Wayne Cole. Editing: Jacqueline Wong, Mike Harrison and Chizu Nomiyama Our Standards: The Thomson Reuters Trust Principles.
