Equity rally stalls as German data casts cloud over global growth
Europe's growth engine Germany too has been displaying alarming signs.
LONDON (Reuters) - Global stocks traded just off three-week highs on Thursday after unexpectedly weak trade and machinery orders data from Germany and Japan hinted at a stalling in the momentum of some of the world s biggest economies.
An oil price bounce, a flat dollar and gains in Chinese markets provided some support, but with worries growing over Germany and the U.S. Federal Reserve due to release minutes of its last meeting, investors were wary of extending world shares six-day rally any further.
"Risk-on week continues, but it s not a one-way street," Societe Generale analysts told clients.
While some beaten-down assets in emerging markets and commodities could continue to rally, there were risks to the broader picture, they said.
"The weakness in the global economy and deleveraging process in emerging markets will continue to weigh on risky markets," they added.
MSCI s all-country equity index .MIWD00000PUS was flat after rebounding 7 percent since last Friday when weak U.S. jobs data led to expectations that the first Fed rate rise in almost a decade would be delayed into next year.
The doubts about the state of growth in the developed world reared their head again as Japan s machinery orders fell in August by 5.7 percent. The data bucked expectations of a rise, indicating capital expenditure remains weak and undermining hopes of an inflation pick-up
The data took Japanese stocks .N225 .TOPX around 1 percent lower while the yen was dampened by expectations the Bank of Japan might have to resort to more money-printing.
Europe s growth engine Germany too has been displaying alarming signs.
Just a day after data showed industrial output dropping 1.2 percent for its steepest fall in a year, German exports plunged 5.2 percent in August for their biggest monthly decline since the height of the global financial crisis.
And a warning by Deutsche Bank of a record pre-tax profit in the third quarter pushed its shares 2.5 percent lower at one point before they recovered (DBKGn.DE). German shares opened half a percent lower though investors stepped in to buy, boosting the market .GDAXI.
The pan-European FTSEEurofirst 300 index .FTEU3 also wobbled, managing to claw back some losses after falling about 0.4 percent.
But John Plassard, senior equity sales trader at Mirabaud Securities, said Deutsche Bank s warning could herald tough times for the banking sector across the continent.
"We could see more and more big writedowns hit a sector which thought it was starting to come to terms with the big restructurings in the wake of the 2008 crisis," he said.
All the data chimes with recent grim warnings from international organisations such as the IMF that have pointed to stalling recovery momentum in Germany, Britain and United States along with recession in big emerging markets Russia and Brazil.
Emerging assets also retreated after strong gains in recent days, with MSCI s equity index .MSCIEF fell 0.6 percent and most currencies easing against the dollar.
However Chinese shares rose 3 percent, playing catch-up with the past week s global rally .SSEC .CSI300.
Investors will have an opportunity to gauge the thinking of U.S. central bank officials when the minutes of the Fed s September meeting, at which it opted not to hike rates, are released later in the day.
Fading chances of a near-term lift-off by the Fed and expectations of a rate hike only in 2016 have taken a toll on the dollar, which fell against the euro EUR= and a broad basket of currencies .DXY.
The greenback dipped 0.2 percent to 119.80 yen JPY=, down from the week s high of 120.575 on Tuesday. The euro was up 0.5 percent to $1.1287 EUR= while commodity currencies such as the Australian and Canadian dollars also firmed as the turn in Fed expectations supports prices of commodities including oil.
Brent crude futures bounced more than 1 percent to almost $52 per dollar, edging back towards one-week highs LCOc1.
