Global stock markets drifted lower Wednesday as traders awaited a run of key U.S. economic data and an expected interest rate cut from the Bank of England.
KEEPING SCORE: In Europe, France’s CAC 40 dipped 0.7 percent to 4,299, while Germany’s DAX shed 0.2 percent to 10,127. Britain’s FTSE 100 edged down 0.3 percent to 6,628. U.S. shares were set to drift lower, with Dow futures and the broader S&P 500 futures down 0.2 percent.
EUROPEAN CONTRAST: A survey indicates that the British economy is heading for a possible recession in the wake of the country’s decision to leave the European Union, whereas the neighboring 19-country eurozone appears to have brushed aside any of the negative fallout from so-called Brexit. Financial information company IHS Markit said its composite purchasing managers index — a broad gauge of activity across the manufacturing and services sector — rose in July for the eurozone to a six-month high of 53.2 points from 53.1 the previous month. The picture is very different for Britain, where the equivalent indicator slumped to 47.3 in July from 51.9 the previous month. That, according to the firm, signals a 0.4 percent quarterly contraction in the third sector.
BANK OF ENGLAND IN FRAME: As a result, the Bank of England is set to respond to the deteriorating economic outlook by cutting its main interest rate on Thursday from the current record low of 0.5 percent and unveiling other measures designed to stimulate the British economy.
ANALYST TAKE: “A failure to provide appropriate stimulus measures tomorrow could rock the markets and cause some large moves,” said David Cheetham, market analyst at XTB.
U.S. DATA: In addition, investors will also be monitoring a run of U.S. economic data over the rest of the week that culminates Friday with the nonfarm payrolls report for July. A key release later Wednesday will be the monthly non-manufacturing report from the Institute for Supply Management.
JAPAN WOES: Disappointment is already setting in over how the substance of Japan’s 28 trillion yen ($272 billion) economic stimulus package falls far short of the hype, given that much of the money is already in the pipeline. A strong yen is also deepening pessimism over prospects for Japan’s recovery.
ASIA’S DAY: Japan’s benchmark Nikkei 225 slipped 1.9 percent to finish at 16,083.11. Australia’s S&P/ASX 200 dropped 1.4 percent to 5,465.70. South Korea’s Kospi lost 1.2 percent at 1,994.79. Hong Kong’s Hang Seng dipped 1.8 percent to 21,739.12, but the Shanghai Composite inched up 0.2 percent to 2,978.46.
ENERGY: Oil prices rebounded from their recent plunge. Benchmark U.S. crude added 24 cents to $39.75 a barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, used to price international oils, rose 32 cents to $42.12 a barrel in London.
CURRENCIES: The euro fell 0.2 percent to $1.1195 while the dollar rose 0.1 percent to 101.17 yen.
