Oil prices slid on fears of more painful Covid lockdowns in China
London (AFP) - European and US stocks made modest gains on Wednesday on news that major economies contracted in November and as traders looked ahead to Federal Reserve committee minutes.
Paris and London closed in positive territory and Wall Street gained around 0.2 percent in early deals, while Frankfurt ended flat.
The eurozone’s composite purchasing managers index (PMI), a key economic indicator, improved from 47.3 in October to 47.8 in November, S&P Global said.
But activity languished under 50 – signifying the fifth consecutive month of economic contraction as inflation spikes and dampening the outlook for the fourth quarter.
The United States’ composite PMI hit a three-month low of 46.3 in November, down from the October figure of 48.2, with services business activity and manufacturing output data also falling.
Traders were expecting the results of a meeting of the influential Federal Open Market Committee in the United States.
“It’s been a fairly lacklustre session as investors weigh up the release of tonight’s FOMC minutes against a backdrop of a weakening economic outlook,” noted Michael Hewson, chief market analyst at CMC Market UK.
“Stock markets have remained supported as optimism over a less hawkish Fed is outweighing growth concerns. But I can’t imagine investors will continue to take excessive risk heading into a potential recession,” said City Index analyst Fawad Razaqzada.
- ‘Recession is inevitable’ -
Britain’s composite PMI was fractionally higher, from 48.2 to 48.3 in November, but that marked the fourth straight contraction.
The news comes after the UK government recently confirmed that the nation’s economy was in recession, with inflation sitting at a 41-year high.
“Both data suggest that recession is inevitable in both eurozone and UK economies, with the UK likely to be designated officially before the eurozone due to the weaker Q3 data,” Monex Europe analyst Maria Marcos told AFP.
Oil prices slid on disappointing US data and fears of more painful Covid lockdowns in China that could ravage the Asian giant’s energy demand.
The main American oil contract, West Texas Intermediate, briefly sank by more than five percent on Wednesday on China concerns and the underwhelming US data.
Reports that the European Union is considering a price cap on Russian crude and pessimistic global growth forecasts by the OECD are also holding back prices, according to analysts.
“With China also grappling with record numbers of Covid cases the macro-outlook has continued to deteriorate for oil this week, with prices on course to decline for the third week in a row,” said Hewson.
The dollar sank more than one percent against the British pound and weakened against other rival currencies as investors mulled mixed earnings and economic data.
“The US dollar fell sharply again today as concerns intensified that the economy is heading for a recession after a poor set of PMI numbers came out from the services and manufacturing sectors,” said Razaqzada.
“An economic slowdown is expected to weigh on inflation, reducing the need for the Fed to maintain an aggressive tightening stance.”
- Key figures around 1630 GMT -
London - FTSE 100: UP 0.2 percent at 7,465.24 points (close)
Paris - CAC 40: UP 0.3 percent at 6,679.09 (close)
Frankfurt - DAX: FLAT at 14,427.59 (close)
EURO STOXX 50: UP 0.4 percent at 3,946.44
New York - Dow: UP 0.2 percent at 34,175.97
Hong Kong - Hang Seng Index: UP 0.6 percent at 17,523.81 (close)
Shanghai - Composite: UP 0.3 percent at 3,096.91 (close)
Tokyo - Nikkei 225: closed for a holiday
Euro/dollar: UP at $1.0367 from $1.0304 on Tuesday
Dollar/yen: DOWN at 139.69 yen from 141.23 yen
Pound/dollar: UP at $1.2071 from $1.1886
Euro/pound: DOWN at 85.89 pence from 86.69 pence
West Texas Intermediate: DOWN 4.5 percent at $77.30 per barrel
Brent North Sea crude: DOWN 3.8 percent at $84.34 per barrel