Declining business sentiment in Germany fails to move European markets as investors await speech by US Fed chair
25 August 2021 - 12:36
byAgency Staff
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London — European markets were subdued on Wednesday, with Germany’s weaker economic sentiment data failing to inspire investors who kept their powder dry ahead of a Federal Reserve speech on Friday.
The Stoxx index of 600 European companies, nudged 0.15% higher to 472.51 points, less than four points from its record high set earlier this month. Fund managers expect European stocks to hold around current record levels for the rest of 2021, a Reuters poll shows.
Business morale in Germany, Europe’s biggest economy, fell for the second straight month in August, pointing to a loss of momentum due to worries over Covid-19 and supply bottlenecks. The DAX blue-chip stock index in Frankfurt was little changed after the Ifo Institute data.
Instead, markets globally were looking ahead to Friday, when Jerome Powell, chair of the US Federal Reserve, is due to speak at the annual Jackson Hole symposium. Expectations are high that he might indicate when the central bank could begin “tapering”, or easing stimulus to, an economy now recovering from Covid-19.
But Michael Hewson, chief markets analyst at CMC Markets, said he expected “nothing” from the Fed on Friday, adding that investor concerns about tapering had eased.
“The Fed has always been data dependent and the US August payrolls report due in September will be more important than Jackson Hole,” Hewson said.
While data remains robust, there are clear signs the global economy is losing momentum, after an early-2021 rebound from last year’s pandemic-driven slump.
Citi’s global economic surprise index, which measures the degree to which the data is beating or missing economists’ forecasts, this week turned negative for the first time since June, indicating more misses than beats. The equivalent US and Chinese indices turned negative weeks ago.
Asian shares held their recent gains on Wednesday after last week’s pummelling, though the focus for most asset classes was on the coming Fed event.
The MSCI’s broadest index of Asia-Pacific shares outside Japan spent most of the day little changed, but was last up 0.37%, and about 4% higher so far this week.
This marks a change from last week, when the index fell to its lowest in 2021, spooked by a combination of fears about slowing growth in Asia amid outbreaks of the Delta variant of Covid-19 and concern that the Fed might begin shrinking its monetary stimulus sooner rather than later.
Japan’s Nikkei was also flat, but a Reuters poll of analysts and fund managers shows Japanese shares are expected to recover from their eight-month low marked on Friday to near a 30-year high by the end of this year.
Chinese regulatory crackdowns that have roiled sectors from technology to property, also weighed on shares in Hong Kong and China, dragging on the broader Asian index.
The yield on benchmark 10-year Treasury notes was last at 1.2952%, little changed from a US close of 1.29%, having touched as high as 1.304% earlier in the session.
The dollar was near a one-week low versus major peers amid easing concerns that the highly contagious Delta coronavirus variant could derail a global economic recovery.
US crude dipped 0.2% to $67.39 a barrel, while Brent crude was little changed at $70.98/bbl. Both are up about 8% on the week, however, after posting their biggest weekly decline in more than nine months last week.
Gold fell in tandem with the broad increase in risk appetite, with the spot price dropping 0.45% to $1,794 per ounce.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Global stocks subdued ahead of Jackson Hole
Declining business sentiment in Germany fails to move European markets as investors await speech by US Fed chair
London — European markets were subdued on Wednesday, with Germany’s weaker economic sentiment data failing to inspire investors who kept their powder dry ahead of a Federal Reserve speech on Friday.
The Stoxx index of 600 European companies, nudged 0.15% higher to 472.51 points, less than four points from its record high set earlier this month. Fund managers expect European stocks to hold around current record levels for the rest of 2021, a Reuters poll shows.
Business morale in Germany, Europe’s biggest economy, fell for the second straight month in August, pointing to a loss of momentum due to worries over Covid-19 and supply bottlenecks. The DAX blue-chip stock index in Frankfurt was little changed after the Ifo Institute data.
Instead, markets globally were looking ahead to Friday, when Jerome Powell, chair of the US Federal Reserve, is due to speak at the annual Jackson Hole symposium. Expectations are high that he might indicate when the central bank could begin “tapering”, or easing stimulus to, an economy now recovering from Covid-19.
But Michael Hewson, chief markets analyst at CMC Markets, said he expected “nothing” from the Fed on Friday, adding that investor concerns about tapering had eased.
“The Fed has always been data dependent and the US August payrolls report due in September will be more important than Jackson Hole,” Hewson said.
While data remains robust, there are clear signs the global economy is losing momentum, after an early-2021 rebound from last year’s pandemic-driven slump.
Citi’s global economic surprise index, which measures the degree to which the data is beating or missing economists’ forecasts, this week turned negative for the first time since June, indicating more misses than beats. The equivalent US and Chinese indices turned negative weeks ago.
Asian shares held their recent gains on Wednesday after last week’s pummelling, though the focus for most asset classes was on the coming Fed event.
The MSCI’s broadest index of Asia-Pacific shares outside Japan spent most of the day little changed, but was last up 0.37%, and about 4% higher so far this week.
This marks a change from last week, when the index fell to its lowest in 2021, spooked by a combination of fears about slowing growth in Asia amid outbreaks of the Delta variant of Covid-19 and concern that the Fed might begin shrinking its monetary stimulus sooner rather than later.
Japan’s Nikkei was also flat, but a Reuters poll of analysts and fund managers shows Japanese shares are expected to recover from their eight-month low marked on Friday to near a 30-year high by the end of this year.
Chinese regulatory crackdowns that have roiled sectors from technology to property, also weighed on shares in Hong Kong and China, dragging on the broader Asian index.
The yield on benchmark 10-year Treasury notes was last at 1.2952%, little changed from a US close of 1.29%, having touched as high as 1.304% earlier in the session.
The dollar was near a one-week low versus major peers amid easing concerns that the highly contagious Delta coronavirus variant could derail a global economic recovery.
US crude dipped 0.2% to $67.39 a barrel, while Brent crude was little changed at $70.98/bbl. Both are up about 8% on the week, however, after posting their biggest weekly decline in more than nine months last week.
Gold fell in tandem with the broad increase in risk appetite, with the spot price dropping 0.45% to $1,794 per ounce.
Reuters
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