Global shares rose on Tuesday, lifted by a rally in Asia, where the yuan bounced after China pledged to step up support for its sputtering economy, while evidence of a slowdown in European growth dented the euro.
China’s top leaders pledged late on Monday to step up help for the economy, which is struggling to sustain a post-COVID recovery and signalled there would be more to come for the property industry.
The MSCI All-World index rose 0.2%, boosted by gains in the Chinese stock market, where the mainland index rose 1.9% and Hong Kong stocks rose 3% thanks to a surge in property stocks that had been diving on debt repayment worries. [.HK][.SS]
But the positive momentum did not carry over into Europe, where stocks and the euro struggled to remain in positive territory, as concern about recession resurfaced after regional surveys the day before showed business activity shrunk far more than expected in July.
“There’s a couple of things. Firstly, is that where European and U.S. traders are concerned, there are almost bigger fish to fry in this part of the world, with the Fed coming up tomorrow night and then the ECB on Thursday,” Michael Brown, a market strategist with TraderX said.
“The second thing is this week, and certainly since Monday morning, we’ve seen a real big turnaround in the data coming out of Europe. The PMIs were, quite frankly, disastrous,” he said.
Monday’s Purchasing Manager Indexes came in below expectations for the euro zone as a whole, as well as in key economies such as France and Germany, prompting traders to rethink what the European Central Bank might signal in terms of the rate outlook when it meets on Thursday.
Tuesday’s macro releases offered evidence of a deterioration of business confidence in Germany this month, and demand for loans in the euro zone hitting a record low in the second quarter, as rising interest rates took their toll, according to an ECB survey.
The Federal Reserve releases its decision on monetary policy on Wednesday.
Markets anticipate 25-basis-point rate hikes from both the Fed and the European Central Bank this week, but beyond that pricing diverges from policymakers’ rhetoric, meaning a great deal of focus will fall on their tone and outlook.
