Stocks Edge Up on Upbeat Manufacturing Data -- Update
Global stocks started the second half of the year firmer as a flurry of manufacturing readings added to confidence in the health of the world economy.
The Stoxx Europe 600 was up 0.8% in morning trading, on track to snap a four-session losing streak. Asian markets mostly ended slightly higher, while the S&P 500 and Dow Jones Industrial Average were both poised to open up 0.3% after closing out their seventh consecutive quarters of gains.
Shares of banks, energy companies and miners led gains in Europe Monday, which typically indicates confidence in the strength of the economy. The eurozone's manufacturing PMI for June was revised up to 57.4 from 57.3, reaching a 74-month high, following upbeat readings in Japan and China. Data on U.S. manufacturing are due later Monday.
Oil-and-gas companies also advanced in Europe, tracking a rise in oil prices after local markets closed Friday. Brent crude was last up 0.2% at $48.96 a barrel after closing out its worst quarter since 2015. Shares of France's Total SA were up 1.9%, leading the sector, after it said it would sign a deal that completes a $1 billion investment in a giant Iranian gas field.
As investors favored risk assets, the dollar rose 0.5% against the yen while gold fell 0.6% to $1,235 an ounce, around its lowest since May.
Trading volume is expected to be lower at the start of the week ahead of the July 4 holiday in the U.S.
In government bonds, German 10-year yields cooled to 0.460% from 0.472% Friday after European Central Bank executive board member Yves Mersch said Sunday the ECB hasn't yet done enough to create a sustained economic recovery in the eurozone. U.S. 10-year Treasury yields edged up to 2.315% from 2.298% on Friday while two-year yields rose to 1.388% from 1.385%, their highest since 2009.
Expectations that global central banks, including the ECB and Bank of England, might be moving away from ultra-accomodative monetary policy had sent government bond yields sharply higher last week.
In the second half of the year, "Our perspective is we're going to have pretty modest growth and modest inflation," said Greg Woodard, who directs portfolio strategies at Manning & Napier. As a result, he expects pressure on government bonds to remain modest and for stock returns to be limited. "We see rates grinding a bit higher but [monetary] conditions are going to remain fairly accommodative around the world," he said.
The euro fell 0.4% to $1.1385 on Monday, while the wider WSJ Dollar Index edged up 0.3% after its worst quarter since the start of 2016.
Earlier, stocks in Asia mostly inched a touch higher as investors held back on making decisive bets in the absence of a firm lead from the U.S.
Hong Kong's Hang Seng was up 0.1% after its best first-half performance since 2009, while Japan's Nikkei Stock Average was also 0.1% higher as a central bank survey showed business confidence among the nation's large manufacturers strengthened to its highest level in more than three years in the second quarter.
Chip company Toshiba fell in afternoon trading however after The Wall Street Journal reported that a plan for the sale of the Japanese company's semiconductor unit includes an option for South Korean chip maker SK Hynix to eventually take a minority stake in the business, contradicting Toshiba's public statements.
The Shanghai Composite inched up 0.1% as a private gauge of China's factory activity rebounded in June to show an expansion. echoing last week's official data.
Market participants turned their attention to China's debt and currency markets as the so-called Bond Connect link-- a program allowing foreign investors to buy into the world's third-biggest bond market via Hong Kong--went live.
China's bond market showed little reaction but the newly opened bond-trading link between Hong Kong and mainland China could result in an initial capital inflow of up to $250 billion, according to Ping An Asset Management.
"For foreign investors wishing to access the Chinese market, the Bond Connect would be a more attractive option than the current practice of accessing the interbank bond market--in terms of limits in quota, convenience in trading and criteria in clearing," said Zhang Dong, vice president of Ping An Securities, adding that he sees "an immense growth opportunity."
Still, that would be only a fraction of the country's $9 trillion bond market. Goldman Sachs recently said that as of the end of March, the total amount of Chinese domestic bonds held by foreign investors was around 830 billion yuan ($122 billion).
The Chinese currency held steady against the U.S. dollar after the People's Bank of China fixed the yuan near its highest level against the dollar since November.
Australia's S&P ASX 200 fell around 0.7%, bucking the regional trend, as major banks extended last week's drop and utilities and property trusts came under pressure.
John Wu
,
Shen Hong
,
Paul Hannon
and Megumi Fujikawa contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at ese.erheriene@wsj.com
(END) Dow Jones Newswires
July 03, 2017 05:51 ET (09:51 GMT)