Saturday, September 18

Shares shrug off growth worries


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LONDON — World stocks climbed on Wednesday, with investors looking beyond economic data that pointed towards slowing growth to focus on a likely continuation of massive central bank stimulus measures.

The Euro STOXX 600 rose as much as 0.9% before trimming gains a tad, just shy of its all-time high.

Indexes in Paris and London added 1% and 0.6% respectively. Travel & leisure and insurance stocks were among the top gainers.

Wall Street futures gauges also pointed to early gains of around 0.3%.

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The upbeat tone for equities came in spite of signs that Asia’s factory activity lost momentum in August.

A resurgence in coronavirus cases disrupted supply chains across the region, with the data likely to raise concerns that faltering manufacturing will add to economic headaches caused by slumping consumption.

Yet many market players remained cautiously positive on prospects for equities in particular, with many expecting central bank stimulus measures to remain and companies to report strong earnings.

“We’ve clearly witnessed a deceleration of macro data from the months before,” said Olivier Marciot, senior portfolio manager with Unigestion.

“But we’re in the moment where it’s still semi-Goldilocks – there is the inflation element that is still for the moment being discarded by central bankers… but earnings are very good, macro is very strong and still the central banks are remaining very accommodative.”

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‘RECOVERY IS SLOWING’

Investors are also awaiting manufacturing activity and unemployment data for the euro zone later in the day.

The MSCI world equity index, which tracks shares in 50 countries, gained 0.2%. Like the S&P 500, the MSCI index closed out its seventh straight month of gains in August, propelled by bets of continued central bank support.

MSCI’s broadest index of Asia-Pacific shares outside Japan turned positive, adding 0.2% to its highest since early August, having posted gains in six out of the last seven sessions.

The gains in Asia were in spite of China’s Purchasing Managers’ Index (PMI) showing a contraction in activity for the first time in nearly 18 months, because of COVID-19 containment measures and supply bottlenecks.

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“We’re moving past the point of peak growth. The strongest period of the recovery now looks to be behind us, we’re seeing that in the economic data,” said Hugh Gimber, global market strategist at JP Morgan Asset Management.

“The recovery is slowing, but it remains on track. And so that I think is what’s underpinning markets.”

DOLLAR LOWS

The dollar traded near its lowest point in nearly three weeks versus major peers, with currency investors already focused on a key US jobs report due on Friday for clues on when the Federal Reserve might begin paring stimulus.

Fed Chair Jerome Powell has suggested an improvement in the labor market is one major remaining prerequisite for a tapering of asset purchases.

The dollar edged higher against six rivals to 92.744, away from a low of 92.395 hit on Tuesday.

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Still, the Fed last week appeared in no rush to pull back from its massive stimulus, with the continuing dovish tone contributing to a strong monthly performance by the United States’ three main indexes, even as US consumer confidence fell to a six-month low in August as soaring COVID-19 infections and rising inflation dampened the economic outlook.

Government bond yields across the euro area touched their highest levels in around six weeks, pushed up by unease over the future pace of European Central Bank bond purchases.

Germany’s 10-year Bund yield briefly touched its highest level in just over six weeks at -0.365% before steadying at around -0.38%.

Yields on benchmark 10-year Treasury notes gained to stand at 1.32% compared with the US close of 1.30%, edging into the upper end of the range in which they have traded for the past two months.

(Reporting by Tom Wilson in London; Editing by Alex Richardson and Andrew Cawthorne)

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