Gloomy data makes investors more cautious on world economy

Global stocks were mostly down and oil slipped on Tuesday as declining factory activity in the euro zone and China tempered investors’ optimism over U.S. economic prospects and a likely end to Fed rate hikes.

Markets also digested fresh U.S. manufacturing data, which appeared to stabilize at weaker levels in July amid a gradual improvement in new orders. Other data showed U.S. job openings fell to the lowest level in more than two years in June, but remained at levels consistent with tight labour market conditions.

On Wall Street, The Dow Jones Industrial Average was virtually flat at 35,566.76, the S&P 500 lost 0.42%, to 4,569.61 and the Nasdaq Composite dropped 0.78%, to 14,233.63.

Shares of Merck & Co. dipped 0.1% even though it raised its full-year profit forecast. Pfizer missed estimates for quarterly revenue but its shares gained 1% after the drugmaker said it would launch a program to cut costs if demand for its COVID-19 products remains muted this fall; and Caterpillar Inc rose 7% after reporting a better than expected rise in second-quarter profit, although it also warned on third-quarter sales and margins.

European stocks fell 0.6%, deepening losses through the morning and stepping back from a 2% increase in July, the index’s second month of gains.

UK stocks were little changed, though HSBC climbed as much as 3% after announcing a $2 billion share buyback and raising its key profitability target.

Losses accelerated across European markets after data showed manufacturing activity in the bloc contracted in July at the fastest pace since May 2020 amid slumping demand even as factories cut their prices sharply.

The data disappointed investors who are readying for an end to a series of U.S. Federal Reserve interest rate hikes, with an increase last week widely seen as one of the last in its current tightening cycle.

The yield on 10-year Treasury notes was up 8.4 basis points at 4.041%. The two-year yield, which typically moves in step with interest rate expectations, was up 2.8 basis points at 4.902%.

Market players put Tuesday’s losses down to a combination of profit taking at the start of the month, as well as nerves over the health of the global economy.

“The economy is a little bit weaker than perhaps people would like, and I think that’s a concern for earnings growth heading into the second half of the year,” said Michael Hewson, chief market analyst at CMC Markets.

Source: Reuters