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Global stocks fell on Tuesday, as fresh data suggested that high interest rates weighed on the US labour market and factory activity.
Wall Street’s benchmark S&P 500 fell 0.3 per cent, extending early morning losses, while the tech-focused Nasdaq Composite gave up 0.5 per cent.
The moves came as fresh data signalled that demand for US workers continued to slow as borrowing costs reached historic highs, with the number of job openings falling to 9.6mn in June — the lowest level since April 2021.
Separately, the ISM manufacturing purchasing managers’ index came in at 46.4 in July, missing economists’ forecasts and remaining below the neutral 50 mark in a sign that the majority of survey respondents reported a contraction in the sector.
Yet US stocks clocked their longest monthly winning streak in two years in July, as signs of falling inflation and resilient growth raised investors’ hopes that the US Federal Reserve could complete its monetary tightening cycle without causing a recession.
“We still have key macro events this week . . . but [the] market seems content in its view that the central banks are close to the end of their rate hiking policy,” said Mohit Kumar, chief Europe financial economist at Jefferies.
Meanwhile, the shares of industrial bellwether Caterpillar gained 7.2 per cent as the company reported that strong demand and higher prices helped it beat earnings expectations in the second quarter.
In Europe, the region-wide Stoxx Europe 600 index fell 0.6 per cent, extending early morning losses, while France’s Cac 40 lost 0.8 per cent and Germany’s Dax gave up 0.9 per cent. The consumer goods sector led declines, down 1.2 per cent.
The moves came as investors fretted that a prolonged period of high borrowing costs in the eurozone, as well as China’s stalled economic recovery, would weigh on global demand for goods.
The HCOB’s final eurozone manufacturing purchasing managers’ index fell to 42.7 in July from 43.4 in the previous month, hitting its lowest level since May 2020 when the region’s economy was hit by the onset of the Covid-19 pandemic.
The index measuring factory activity in Germany, the eurozone’s largest economy, fell to 38.8 from 40.6 in the previous month. A reading below 50 means the majority of respondents reported a contraction in activity.
The declines echoed markets in China, where the CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 0.4 per cent and Hong Kong’s Hang Seng lost 0.3 per cent, as investors worried about the country’s stalled post-pandemic recovery.
The Caixin manufacturing purchasing managers’ index, a private sector survey tracking monthly changes in factory activity, slipped to 49.2 in July from 50.5 in June, undershooting analysts’ forecasts of 50.3.
The politburo, China’s top decision-making body, had earlier vowed to extend further support to prop up the world’s second-largest economy but offered few details, testing investors’ nerves.
“This limited policy support means that China’s recovery probably will continue to be ‘tortuous’, uneven and drawn out,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
Elsewhere in Asia, Japan’s Topix index was up 0.6 per cent, and South Korea’s benchmark Kospi rose 1.3 per cent.
Slowing inflation prompted Australia’s central bank to keep its key interest rate unchanged for the second consecutive meeting, at 4.1 per cent, defying market forecasts of a 0.25 percentage point increase. The S&P/ASX 200 gained 0.5 per cent.
The meeting came a week after central banks in the US and Europe raised rates but refrained from their usual hawkish guidance in a sign that the global tightening cycle could soon draw to a close.
