U.S. and European shares fell on Wednesday as a drop in oil prices weighed on energy stocks, while two-year U.S. Treasury yields ended August with the biggest monthly increase since November on growing expectations the Federal Reserve will raise interest rates.
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The ISM index of national factory activity fell to 49.4 from 52.6 in July, missing expectations for a reading of 52.0. It was the first contraction in manufacturing since February. Friday’s report is expected to show the creation of 175,000 nonfarm payrolls in August. USA employers are projected to have added 180,000 jobs in August, according to economists surveyed by Bloomberg.
The S&P 500 is up 126.92 points, or 6.2 percent. The tech-heavy Nasdaq rose, boosted by Charter Communications, which gained 4.5 per cent.
European shares also lost ground after the weak U.S. ISM data.
In overseas trading, stock markets across the Asia-Pacific region extended a recent trend and turned in another mixed performance on Thursday.
“The ISM data was, in a word, disappointing”, said Peter Kenny, senior market strategist at Global Markets Advisory Group in NY.
“It has forced investors to reconsider the landscape, not go blindly into the narrative that spells out a certainty about interest rates being bumped up in September”.
Oil prices extended Wednesday’s declines, with the market focused for a second straight day on US government data showing a rise in USA crude stocks in the last week.
The blue chip Dow Jones futures settled down 49 points at the end of NY trading.
The Dow Jones industrial average added 18.42 points, or 0.1 percent, to 18,419.30. The S&P 500 .SPX closed down 5.17 points, or 0.24 percent, at 2,170.95.
The Toronto Stock Exchange’s S&P/TSX composite index fell 87.70 points, or 0.60 per cent, to 14,597.15.
Brent crude settled down $1.33, or 2.75 per cent, at $47.04 a barrel.
Oil prices tumbled to more than two-week lows, with US crude falling more than 3.5 percent, after government data showed a large weekly build in USA crude and distillate stockpiles and a smaller-than-expected draw in gasoline.
Data showing the US private sector added 177,000 jobs in August, compared with expectations of 175,000, boosted investors’ optimism about Friday’s numbers.
The yield on the 10-year Treasury note inched up to 1.570%, compared with 1.568% Wednesday.
“Everybody’s just waiting for the number tomorrow”, said Craig Bishop, RBC Wealth Management’s lead strategist for US fixed income.
The dollar’s weakness helped spot gold recover after touching a more than two-month low of $US1,301.91 an ounce.
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Brazil’s real extended what has become the world’s best currency rally on Wednesday, gaining 0.4 per cent versus the USA dollar as President Dilma Rousseff was impeached, fuelling optimism over an economy that is suffering its deepest recession in a century.
