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Tuesday 21:00 BST. A wave of bullishness swept through US and European equity markets as a batch of well-received corporate earnings reports outweighed fresh concerns about the outlook for the global economy.
However, the positive mood did not extend to industrial commodities, as Brent crude spent much of the day back below the $100 a barrel level and the price of copper touched a fresh 18-month low.
The euro also came under pressure as data showing a contraction in German private sector output in April – the first in five months – rekindled talk of an interest rate cut from the European Central Bank.
Tobias Blattner at Daiwa Capital Markets said the chief surprise had come from a deterioration in German service sector activity, given the country’s record employment levels and recent strong wage increases.
“This suggests that continued political uncertainty at a euro area level and fears over a more prolonged slowdown in global growth prospects are continuing to hit sentiment in the euro area’s largest economy,” Mr Blattner said.
Lena Komileva at G+ Economics said the data were sufficiently weak to intensify the pressure on the ECB to cut rates. “With Germany unable to offset the austerity and credit crunch drag on growth in the periphery, and with excess capacity growing and business expectations falling, the only question is why the ECB has not cut rates already,” she said.
April PMI reports from China and the US also came in weaker than expected. In China, the HSBC-Markit “flash” manufacturing PMI fell to 50.5 from 51.6 in March with analysts highlighting a big fall in the export orders.
“The export weakness tells us that demand elsewhere is soft – which we suspected anyway – and the ongoing rebalancing of the economy continues to argue for potential weakness in industrial commodities,” said Kit Juckes at Société Générale.
Meanwhile, the US “flash” manufacturing PMI reading was the weakest in six months, heightening concerns that the economy was hitting a spring “speed bump” earlier than usual.
“The seasonal slowdown has typically only shown up in May data and lasted for all of the summer, so this is a disconcerting early start to any seasonal influence,” said Alan Ruskin, a strategist at Deutsche Bank.
However, the gloomy picture painted by the data did little to dent equity markets. Admittedly, the Shanghai Composite index fell 2.6 per cent, its biggest one-day drop since the end of March while the Nikkei 225 in Tokyo edged down 0.3 per cent.
But the FTSE Eurofirst 300 jumped 2.4 per cent, its best showing for seven months, and the S&P 500 rose 1 per cent, lifted by generally positive earnings news.
It was a different picture for industrial commodity prices as Brent oil fell as low as $98.78 a barrel before paring its decline to settle 8 cents weaker at $100.31. Copper fell 1 per cent to $6,870 a tonne on the London Metals Exchange, the lowest since October 2011. Gold fell $10 to $1,415 an ounce.
US and German government bond prices fell, with the yield on the 10-year Treasury up 1 basis point at 1.71 per cent and that on the Bund 2bp higher at 1.25 per cent.
But peripheral eurozone debt prices rose sharply, with the yield on 10-year Italian paper falling below 4 per cent for the first time since November 2010.
In the currency markets, the talk of a possible ECB rate cut helped push the euro to a two-week low below $1.30. The yen had a choppy session as the dollar recovered from an early dip below the Y99 level to trade 0.2 per cent higher at Y99.43.
US equities and commodities very briefly sold off – and Treasuries rallied – after a bogus “tweet” from a news agency claimed there had been explosions at the White House.
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