SINGAPORE (Reuters) – Global stocks suffered on Friday as investors focused on economic data for clues to possible interest rate increases and a possible recession in the United States as a new earnings season begins.
The dollar rose and looked poised for its first weekly gain in over a month on Friday.
Oil prices also crawled higher but are still on track for huge weekly losses as weak US economic data and high US gasoline inventories raised concerns about a recession and slowing global demand for oil.
The MSCI Country All Shares Index (.MIWO00000PUS) fell 0.1%, although it was still 8% flatter for the year.
The S&P Global Composite Purchasing Managers’ Index for the eurozone jumped to an 11-month high of 54.4 in April, well above the 50 mark that separates growth from contraction.
PMI data showed the recovery of Germany and France, the two engines of the EU economy, although there was a widening gap between manufacturing weakness and service recovery. UK retail sales fell more than expected by 0.9% in March compared to February.
“Like last month, the (eurozone PMI) survey indicates that price pressures are easing. In manufacturing, cost pressures are falling rapidly on the back of improving supply chain problems and weakening new orders,” ING said.
“Service sector inflationary pressures are also declining, but at a slower pace due to higher wages. For the ECB, this remains the biggest concern in tackling inflation at the moment.”
The STOXX (.STOXX) of 600 European companies remained slightly weaker after the PMI data, although it is still on track for a fifth week of gains.
“The main narrative is that a recession is coming but it’s taking its time,” said Kevin Thuzet, a member of the Carmignac investment committee.
A recession is likely in the US during the end of the third quarter or during the fourth quarter, Touzet said, while the consensus on the outlook in Europe is overly pessimistic in the short term and overly optimistic in the long term.
Thuzette added that although China is recovering, it is not expected to have the “tractive power” to draw the rest of the world to its side as it has in previous economic cycles.
Wall Street futures fell slightly as US stocks are testing the top of a range that has held for several months.
Electric car maker Tesla Inc. (TSLA.O) fell nearly 10% Thursday as its profit margins shrank, pushing up some prices for US models a bit on its website even though it has been taking cuts recently.
Asian stocks are mixed
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 1% and is down about 1.7% for the week so far, the worst performance since bank stability concerns swept the markets in mid-March.
Japan’s Nikkei (.N225) touched an eight-month high and was on track for a second consecutive weekly gain. Shares of Rakuten Bank (5838.T) jumped as much as 40% on its debut, as investors snapped up the shortlist.
Data on Friday showed that Japanese consumer inflation held above the central bank’s March target, keeping market bets alive that the Bank of Japan, which meets next week, may phase out its policy of massive bond-buying to set government bond yields.
“It appears that market participants have taken positions in preparation for policy changes ahead of the meeting,” said Naka Matsuzawa, a strategist at Nomura, though he did not expect any change.
US Treasuries were also higher, with two-year yields continuing to slide on Thursday as investors turned to safety. Yields go down when prices go up. Two-year returns decreased to 4.1518%.
The euro was little changed, while the yen traded at 133.91 against the dollar, down slightly.
Brent crude futures for June delivery were slightly firmer at $81.22 a barrel, while West Texas Intermediate (WTI) crude for June delivery rose 0.12% to $77.46 a barrel.
Elsewhere, mood softened for bitcoin, which returned below $30,000, while a dip in yields led gold, which pays no income, to cross $2,000 an ounce, down 0.9% on the day.
In commodities markets, traders are closely watching the response of producers and buyers to Chile’s plans to nationalize the lithium industry. Chile has the largest reserves in the world.
Edited by Shri Navaratnam
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