European stocks fell yesterday, shrugging off an earlier rebound in Asia, as poor data and concern about major upcoming data and economic meetings eroded investor sentiment.
London’s main index shed 0.6 %, coming back after Monday’s bank holiday. Frankfurt fell 0.7 % and Paris dropped 0.5 %.
“It’s been a lacklustre end to a choppy month for European markets,” said Michael Hewson, chief markets analyst at CMC Markets, although all three main European indices posted small gains for May. “It’s still been a wall of worry with concerns about weak manufacturing data from China, Japan, the UK and the US, weighing on sentiment, though recovering commodity prices and improving consumer spending patterns” counterbalanced that somewhat, he added.
Asian stocks rose, led by a surge in Shanghai, while traders mulled a likely US interest rate rise this summer.
Mainland Chinese shares leapt by more than 3% and Hong Kong, Tokyo and Seoul also rallied, although trading volumes were low following a public holiday also on Wall Street.
US markets were mixed on returning their long holiday weekend despite economic data showing consumer spending rose a sharp 1.0 % in April, the largest month-on-month gain since August 2009.
The Dow was off 0.4 % approaching midday.
Analyst Sylvain Loganadin at DailyFX said traders are being prudent as it is the final trading day of the month.
Moreover, in June there are a number of important events including meetings of Opec, the European Central Bank and the US Federal Reserve, as well as the referendum in Britain on leaving the European Union, which “explain the weak trading volume on European equities markets and increasing risk aversion as these approach”, he added.
The euro see-sawed against the dollar despite news that eurozone inflation remained mired in negative territory before this tomorrow’s interest rate decision from the European Central Bank.
Eurozone consumer prices fell 0.1 % in May after slipping 0.2 in April, the Eurostat statistics agency said.
The figures, dented by low energy prices, were in line with expectations.
Yoav Nizard at currency traders FXCM said the dollar was hit by a technical sell-off and investors “are concerned in the run up to the publication of employment figures in the United States” this Friday given the disappointing non-farm payrolls report last month.
The greenback has been buoyed in recent days by remarks from Federal Reserve chair Janet Yellen last week that the US could raise interest rates “in the coming months” if data from the world’s top economy continues to improve.
Traders saw this as a vote of confidence in the US economy, which has remained resilient even after the Fed raised rates for the first time in almost a decade in December.
The prospect of an imminent US rate hike – traders now believe one is likely in July – had seen the dollar post its best performance since September 2014 this month.