NEW YORK: Global equity markets fell and the euro slumped to a two-month low yesterday as weak economic data from Europe and China weighed on prices, but Wall Street stocks rebounded on news of surprisingly strong US manufacturing and consumer sentiment.
Government bonds rallied and the dollar rose in safe-haven buying as concerns about imminent US spending cuts and the post-election political stalemate in Rome remained major headwinds for risky assets.
The pace of growth in US manufacturing, which rose at its fastest rate in over a year and a half in February, offset some jitters.
Another sign of optimism was a report that showed US consumer sentiment rose in February as Americans were more hopeful that the jobs market will improve, even as confidence in fiscal policy was near all-time lows.
While economic data from Europe and China was disappointing, there are clear signs of economic recovery in the United States and some evidence that Japan is beginning to turn around, a potential swing factor in 2013, said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh.
“We can stand back and have a wider discussion if you wish about about politics and markets, and another discussion about whether equity prices have gotten ahead of themselves, but as of
yesterday it was a most reassuring number,” Milligan said about ISM.
Stocks on Wall Street opened lower but rebounded after the ISM report and release of the Thomson Reuters/University of Michigan’s final reading on consumer sentiment in February.
The automatic spending cuts sparked by “sequestration” will take some growth off the US economy but not enough to push it back into recession, Milligan said.
The Dow Jones Industrial Average was up 43.96 points, or 0.31 percent, at 14,098.45. The Standard & Poor’s 500 Index was up 4.27 points, or 0.28 percent, at 1,518.95. The Nasdaq Composite Index was up 8.18 points, or 0.26 percent, at 3,168.37.
MSCI’s all-country world equity index fell 0.24 percent to 353.59. In Europe, the FTSEurofirst 300
of leading regional companies fell 0.24 percent to close at 1168.64.
The euro tumbled to a 2013 low against the US dollar, which rose to a six-month high against a basket of currencies as weak euro zone data highlighted a growing economic
disparity with the United States.
The euro fell to a 2013 trough of $ 1.2968, its lowest since Dec. 10, and was last down 0.37 percent on the day at $ 1.3008.
The dollar rallied to a session high versus the Japanese yen as an array of data buoyed the safe-haven US currency. The dollar rose as high as 93.48 yen, its highest since Feb. 25. It last traded at 93.56, up 1.1 percent on the day.
US Treasuries prices rose as impending US budget cuts and concern about economic weakness in Europe inspired a bid for safe-haven US debt.
Economists say $ 85 billion in automatic “sequestration” cuts to federal spending, on top of fiscal restraint already in place due to the expiry of the U.S. payroll tax cut, will likely trim US economic growth this year.
The benchmark 10-year US Treasury note was up 6/32 in price to yield 1.8584 percent.
Crude oil slipped to a six-week low below $ 110 per barrel, weighed by growth worries as political gridlock brought the prospect of massive US government spending cuts and on disappointing European industrial data. Oil later pared losses. Brent crude for April delivery was down 92 cents to
$ 110.46 per barrel while US oil fell to $ 90.68, down $ 1.37.
