Stocks cautious as investors focus on weak economic data

US-China trade talks have been the reason behind jittery world stocks. — Reuters pic
US-China trade talks have been the reason behind jittery world stocks. — Reuters pic

LONDON, July 2 — Investors were sticking to the sidelines today as positive sentiment over a resumption of US-China trade talks was offset by weaker global economic data, traders said. 

In Europe, both the French blue-chip CAC 40 index and Frankfurt’s DAX 30 trod water, even if London’s FTSE index outperformed the pack and added half a percentage point.

On the other side of the Atlantic, Wall Street opened almost unchanged, but subsequently fell into negative territory amid lingering trade uncertainty.

“Sentiment appears a bit cautious following the release of disappointing global data and after the US threatened new tariffs on the EU,” said analyst Fawad Razaqzada. 

“But with G20 and Opec meetings behind us, the focus is turning back to economic data for market participants.”

Financial markets had taken cheer yesterday after US President Donald Trump and his Chinese counterpart Xi Jinping agreed to kick-start trade negotiations, but key questions remained unresolved, including on tech trade and intellectual property.

Trump’s notorious unpredictability also made investors more reluctant to place their bets, analysts said.

“The US and China are going to enter a new phase of negotiations,” said Tangi Le Liboux, a strategist at the Aurel BGC brokerage in Paris. 

“We will have to see over coming weeks whether there is real progress in these talks. Don’t forget that Donald Trump can put a question mark over everything with just a single Tweet.”

Among the weaker macroeconomic data, US manufacturing hit a 32-month low amid weakening demand, Germany’s key machine-tool sector sharply downgraded its forecast for this year in the face of Brexit and the US-China trade conflict, and British construction activity contracted at its fastest rate in a decade. 

Observers suggested such weak data could put further pressure on central banks to provide support to economies with fresh stimulus. 

Australia’s central bank on Tuesday lowered the cost of borrowing for the second-straight month, bringing interest rates to a new historic low.

In the US, the Federal Reserve is widely tipped to cut interest rates at its next policy meeting this month. The release of a US jobs report Friday will be closely followed as a weak reading could boost the case for a big reduction.

In the eurozone, however, policymakers at the European Central Bank don’t see a need to rush into a rate cut, Bloomberg reported.

“Stocks may see the next catalysts stem from deteriorating economic data that will support the arguments for the Fed to deliver a stronger commitment to easing and for the other major central banks to step up their efforts,” said OANDA market analyst Edward Moya.

On the oil markets, prices retreated slightly, after Opec agreed yesterday to extend by nine months daily oil output cuts aimed at supporting prices and soaking up excess supplies, following last weekend’s G20 pact between cartel kingpin Saudi Arabia and non-member Russia. — AFP

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