Global stocks creep higher as investors seek safety

London — European stocks crept sluggishly higher on Tuesday as investors sought safety in defensive names, while risk aversion similarly lifted the safe-haven dollar after weak Chinese and US economic data that stoked fears of a global recession.

The dollar briefly hit a one-week high as investors piled back in after ditching the greenback last week in the wake of lower-than-expected US inflation data. The Aussie, euro and yuan buckled.

Europe’s benchmark Stoxx index climbed 0.3% to hit a 10-week high and mark a fifth straight session of gains, led by mining companies as London-listed BHP reported strong results.

But S&P 500 futures and Nasdaq futures dipped, indicating a likely weaker direction for US markets when they open later.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.03% after gains earlier in the day. MSCI’s benchmark index has gained 5% from the year’s lows but is still down 15% this year.

Just as investors were taking heart from a four-week rally in global equities that pushed markets to their highest in more than three months, Monday’s weak Chinese activity data spanning industrial output and retail sales hit sentiment.

Also, US single-family home-builders’ confidence and New York state factory activity fell in August to their lowest since near the beginning of the Covid-19 pandemic, a further sign that the world’s largest economy is softening as the Federal Reserve raises interest rates.

The picture was mixed across Asian bourses on Tuesday, with Tokyo and Taiwan benchmarks flat, while South Korean stocks put on 0.2%.

Chinese stocks gave up early gains as growth concerns remained after data showed economic activity and credit expansion slowed sharply in July, prompting the central bank to unexpectedly cut interest rates.

The blue-chip CSI 300 index slipped 0.2% after dipping on Monday.

Bond markets, meanwhile, continued their tussle between fears about inflation and recession, which are particularly acute in the eurozone.

Germany,s 10-year yield, the benchmark for the eurozone, was up 3 basis points to 0.932%, holding below a two-week high of 1.025% touched last Friday.

Dollar haven

Investors’ latest move to the safety of the dollar came after the raft of weak global economic indicators. The US economy contracted in the first and second quarters, amplifying a debate about the country being, or soon being, in recession.

On Tuesday, the dollar index, which measures the greenback against six major peers, rose as high as 106.87, its strongest since August 8.

The euro, the most heavily weighted currency in the dollar index, dropped 0.28% to 1.01305. The Australian and New Zealand dollars were put on the defensive by frail global data.

Brent crude futures fell 1% to $94.11 a barrel as the bleak economic data from top crude buyer China renewed concerns of a global recession, and the market monitored talks on a reviving deal that could allow more Iranian oil exports.

WTI crude futures shed 0.98% to $88.52 a barrel.

Spot gold dipped slightly to $1,775.6 an ounce as the stronger dollar dented bullion’s appeal and investors watched for signs of future rate hikes by the federal reserve.

Reuters