Business mood cautious ahead of raft of US news

Global stocks were somewhat lead-footed on Tuesday as investors prepared for a run of economic developments, particularly out of the US, that may determine how financial markets perform through the rest of the summer.

By Pan Pylas (AP)

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Published: Wed 31 Jul 2013, 10:32 PM

Last updated: Sat 4 Apr 2015, 7:53 AM

Though the US Federal Reserve is not expected to announce any policy changes at the conclusion of its two-day meeting on Wednesday, investors will be monitoring a raft of economic data this week that could well influence expectations of a change in its monetary policy.

“Traders will remain cautious ahead of the two-day US Federal Reserve meeting which begins tonight,” said David Madden, market analyst at IG.

In Europe, Britain’s FTSE 100 rose 0.2 per cent to 6,574, while Germany’s DAX was up the same rate to 8,278. The CAC-40 in France was also 0.2 per cent higher at 3,975.

Wall Street also appeared headed for modest gains at the open with both Dow futures and the broader S&P 500 futures up 0.1 per cent.

Many in the markets think that the Fed could start reducing its monetary stimulus as soon as September. The Fed is currently buying $85 billion in Treasury and mortgage bonds a month in a move that has kept long-term rates near record lows and supported economic recovery.

The main points of interest in the US later on Tuesday will be the Case-Shiller house price survey and the latest gauge of consumer confidence from the Conference Board. Over the rest of the week, investors will have the monthly manufacturing survey from the Institute for Supply Management to digest, the first estimate of second-quarter US economic growth, as well as a run of payroll surveys, notably Friday’s official nonfarm payrolls report for July.

The dollar is also fairly flat ahead of the data dump over the rest of the week. The euro was 0.1 per cent higher at $1.3272, helped slightly by a survey showing economic confidence in the 17-country eurozone up at a 15 month high. The European Commission’s headline economic sentiment indicator rose to 92.5 in July from the previous month’s 91.3 in another sign that the eurozone may be emerging from recession.

Meanwhile, the dollar rose 0.2 per cent to 98.09 yen. On Monday, the dollar fell to a month-low of 97.61 yen and that weighed heavily on Japanese stocks — a stronger yen could make the country’s exporters more expensive and hurt their fortunes.

The Nikkei 225 index recovered some of Monday’s retreat, closing 1.5 per cent higher at 13,869.82 despite a drop in industrial output for June. The Economy Ministry said manufacturing slipped 3.3 per cent from the month before in June and was 4.8 per cent lower than a year before.

While the data underscored the fragility of Japan’s economic recovery, it also could provide further argument in favour of the aggressive steps taken by Prime Minister Shinzo Abe to rejuvenate the moribund economy.

Elsewhere in Asia, South Korea’s Kospi advanced 0.9 per cent to 1,917.05 while Hong Kong’s Hang Seng added 0.5 percent to 21,953.96. Mainland Chinese shares were mixed.

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