By Huw Jones
LONDON, Aug. 25 (Reuters) – German stocks edged down Wednesday after weaker economic sentiment data, even as the European market as a whole clung to record highs ahead of the Federal Reserve’s speech on Friday.
The STOXX index of 600 European companies rose 0.15% to 472.51 points, less than four points from its record at the start of the month.
Fund managers expect European stocks to hold around current levels for the remainder of 2021, according to a Reuters poll.
Business morale in Germany, Europe’s largest economy, fell for the second month in a row in August, indicating a slowdown amid concerns over increasing COVID cases and bottlenecks in supply.
The blue chip DAX index in Frankfurt lost modest early gains to trade slightly weaker.
Wall Street was heading for a steady start, with futures contracts on Dow, S&P 500 and Nasdaq 100 all firmer.
Markets around the world were waiting on Friday, when Jerome Powell, chairman of the US Federal Reserve, was scheduled to speak at the annual Jackson Hole event.
There have been strong expectations that Powell could indicate when the central bank could start to “cut” or ease stimulus measures in an economy that is now recovering from COVID-19.
John Vail, chief global strategist at Nikko Asset Management, said the market is already expecting a slowdown to begin this year, with no new information expected from Jackson Hole.
“With fewer central bank purchases, bond yields will likely rise globally, but not too much,” Vail said. “However, this will likely be a reason for cyclical and financial stocks to perform well, even if the global economy may decelerate more than expected to reach a more average rate in the future.”
While the data remains strong, there are clear signs that the global economy is losing momentum after rebounding in early 2021 after the crisis from last year’s pandemic.
Citi’s Global Economic Surprise Index, which measures how much data exceeds or misses economists’ forecasts, turned negative this week for the first time since last June, indicating more failures than beats.
The equivalent US and Chinese indices turned negative a few weeks ago.
Asian stocks held onto their recent gains after falling last week, as global stocks rebounded, although most asset classes focused on the Fed’s upcoming event.
The largest MSCI index of Asia-Pacific stocks outside of Japan spent most of the day at about the same level, but was last up 0.37%, and around 4% more so far this week.
This marks a change from last week, when the index fell to its lowest level in 2021, spooked by a combination of fears of slower growth in Asia amid outbreaks of the Delta variant of the new coronavirus, and fears that the Fed may start cutting its monetary stimulus. sooner rather than later.
Japan’s Nikkei was also stable, but a Reuters poll of analysts and fund managers showed Japanese stocks are expected to recover from their eight-month low on Friday to near a 30-year high by now the end of this year.
Chinese regulatory crackdowns that rocked sectors from tech to real estate also weighed on equities in Hong Kong and mainland China, impacting the broader Asian index.
The benchmark 10-year Treasury yield was the latest at 1.2986%, little change from a US close of 1.29%, reaching as high as 1.304% earlier in the session.
The dollar was slightly firmer, trading above a one-week low against other major peers.
US crude fell 0.17% to $ 67.37 per barrel, while Brent crude was little changed at $ 71 per barrel. However, both are up about 8% on the week, after posting their biggest weekly decline in over nine months last week.
Safe haven gold fell alongside the general increase in risk appetite, with the spot price falling 0.48% to $ 1,793 an ounce.
(Edited by Ana Nicolaci da Costa and David Holmes)