By Koh Gui Qing and Yoruk Bahceli
NEW YORK/LONDON (Reuters) -World shares rose on Monday despite a dovish Wall Street following unexpected weakness in U.S. manufacturing data, fueling uncertainty about the U.S. interest rate outlook as the euro zone prepared for a rate cut on Thursday.
In the early evening in New York, the MSCI All Country World Price Index rose 0.41%. US stocks traded gains and losses amid a reported technical issue on the New York Stock Exchange involving the ‘Limit Up-Limit Down’ bands, sending dozens of listed stocks into volatility pauses.
The agency said it is investigating the issue and will provide information as soon as possible.
Shares rose 0.1%, shares fell 0.3% and shares rose 0.6%. The pan-European STOXX index rose 0.32%.
U.S. Treasury yields fell to their lowest level in two weeks and the dollar tumbled after data showed U.S. manufacturing activity slowed for a second straight month in May. Orders for new goods have fallen the most in almost two years.
The soft data supported speculation that the Federal Reserve could cut rates this year, although some investors remained skeptical as inflation remains above the Fed’s 2% target.
In Europe, investors expect the European Central Bank to cut the benchmark interest rate by 25 basis points to 3.75% on Thursday.
“We see inflation limiting the extent to which central banks can cut rates,” said Jean Boivin, head of the Blackrock (NYSE:) Investment Institute. “We see that they keep interest rates high for longer.”
Ten-year government bond yields fell as much as 11 basis points to 4.4021%, falling to 4.404%, the lowest since May 16. The yield on two-year government bonds fell by 7 basis points to 4.823% and also reached 4.816%. the lowest since May 21.
It is believed that the ECB will almost certainly cut rates on Thursday, but after last week’s surprisingly strong eurozone inflation data, markets are now pricing in an easing of less than 60 basis points.
“There is a relatively positive risk tone to start the week, which looks like a continuation of Friday’s positive momentum, although it is somewhat surprising given the great calendar of event risks ahead,” said Michael Brown, strategist at broker Pepperstone in London .
China’s factory activity grew at the fastest pace in about two years in May, data showed on Monday. That brought more optimism to markets after Friday’s data showed the Fed’s preferred inflation measure held steady in April.
“The ECB’s decision is perhaps the most important event to watch, especially after last week’s inflation data, which increases the aggressive risk of only one more cut this year, following a 25 basis point cut on Thursday ” said Brown.
Markets imply about an 80% chance that the Bank of Canada will cut rates at its meeting on Wednesday and an easing of about 60 basis points this year, although analysts hope the easing will be greater.
ASIAN POWER
The dollar fell to a three-week low after weak US manufacturing data. The , a measure of the value of the U.S. currency against six major currencies, fell 0.48% to 104.09.
The dollar also fell to a two-week low against the yen after the data and was last down 0.6% at 156.245.
The euro rose 0.5% against the dollar to $1.0901.
In other currencies, the Mexican peso weakened after the ruling party declared Claudia Sheinbaum the winner of the presidential election by a “large margin”. The US dollar last rose 4.1% to 17.70 pesos.
The Indian rupee strengthened and the stock market rose to a record high, buoyed by expectations of continued economic growth as Prime Minister Narendra Modi looked set for a third term.
Gold rose 1% to $2,350.17 an ounce, having now risen for four straight months, helped in part by buying from central banks and China. [GOL/]
Oil prices fell a day after OPEC+ made a complicated production decision that some analysts described as incrementally bearish for oil prices. [O/R]
fell 3.61% to $78.18 per barrel, while it fell 3.78% to $74.08 per barrel.
European prices rose by more than 8% this year to their highest point of more than 37 euros/MWh, as a disruption in Norway, which overtook Russia as Europe’s largest gas supplier in 2022, pushed exports sharply down.
($1 = 157.1900 yen)
