Global Market Overview

Last updated: April 18, 2013 9:19 pm

Growth concerns keep equities volatile

A woman uses her mobile phone outside an Apple store in Shanghai©AFP

Thursday 21:00 BST. Equity and commodity markets in the US and Europe had a choppy time as investors struggled to shake off lingering concerns about the prospects for global economic growth.

Gold also experienced a fresh bout of volatility but managed to keep intact its recovery from a two-year low struck earlier this week. The yellow metal was up 0.8 per cent to $1,387 an ounce, although silver edged back slightly.

The latest economic reports out of the US did little to quell worries that a slowdown could be under way.

The Philadelphia Federal Reserve’s April survey of manufacturing activity weakened slightly while the index of leading indicators for March also fell. Meanwhile, initial jobless claims edged up slightly last week – the survey period for the Bureau of Labour Statistics’ April non-farm payrolls report.

“The spring and summer dips in economic activity that dominated 2011 and 2012 look to be repeating this year again,” said Steven Ricchiuto, chief economist at Mizuho Securities USA.

The data kept alive the sense of uncertainty in the markets prompted earlier in the week by unexpectedly weak Chinese GDP figures, some worrying numbers from Germany and the International Monetary Fund’s downgrade to its 2013 global growth forecasts. Indeed, Andrew Kenningham at Capital Economics argued that the IMF’s projections – while far from bullish – still looked too optimistic.

“Our forecasts for 2013 are weaker than the IMF’s for all the major advanced economies except the US,” he said. “The biggest differences are for the eurozone, where we envisage a much deeper recession this year than the IMF does.

“In addition, the IMF has raised its forecasts for growth in Japan in response to the unveiling of ‘Abenomics’ but we have left ours unchanged.”

Against the backdrop of growth uncertainty – and some poorly received corporate earnings reports – equity markets see-sawed.

In New York, the S&P 500 fell 0.7 per cent after swinging through a 13-point range. Apple continued to exert a negative influence as investors fretted that the company was experiencing falling sales.

In late trade, the CBOE Vix volatility index, often called Wall Street’s “fear gauge”, was up more than 6 per cent.

In Europe, the FTSE Eurofirst 300 index finally settled a fraction lower – its fifth successive decline. The Nikkei 225 in Tokyo fell 1.2 per cent.

Commodity prices also saw some wild swings but generally ended the day higher. Brent oil, which has been under heavy pressure for the past week, rallied $1.44 to settle at $99.13 a barrel – but not before touching a fresh nine-month low of $96.75.

Copper on the London Metal Exchange briefly fell below the $7,000 a tonne mark for the first time in 18 months but pulled back to finish marginally higher.

But the uncertainty over global growth that has left commodities nursing some significant losses in recent sessions did little to bolster demand for US and German government bonds.

The yield on the 10-year US Treasury was down just 1 basis point at 1.69 per cent while that on the German Bund ended unchanged at 1.23 per cent.

In the currency markets, the euro steadied against the dollar after losing ground in the previous session on the back of comments by Jens Weidmann, the president of the Bundesbank, that the European Central Bank could cut interest rates if warranted by the eurozone’s economic situation.

Kathleen Brooks at Forex.com said: “Mr Weidmann is a big-hitter at the ECB and is known to reside at the hawkish end of the ECB voting spectrum, so when even he touted the notion of a potential rate cut – albeit still unlikely in our view – the FX market hit the ‘sell button’.”

Follow the FT’s market comments on Twitter @FTMarkets.

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