European and Asian stock markets mostly fell yesterday, with Tokyo dropping sharply on a surging yen, as traders reacted to mixed manufacturing data and further losses for oil prices.
The British pound slid against rival currencies as fresh polls showed the campaign for Britain to leave the European Union in the lead, ahead of a June 23 referendum.
“It’s been an unhappy start to June for equity markets with big slides across the board led by basic resource stocks and weakness in commodity prices, as concerns about the global economy reassert themselves once more,” said Michael Hewson, chief market analyst at CMC Markets UK.
Sentiment was generally wary even though official data showed activity in Chinese factories expanded in May for the third straight month, dealers said.
“A slide below $50 a ton in iron ore prices has helped pull mining stocks down heavily along with weak Chinese PMI data overnight, with Antofagasta and Rio Tinto leading the sector lower,” added Hewson.
London’s benchmark FTSE 100 index closed down 0.6%, with Antofagasta shedding 3.1% and Rio Tinto dropping 3.8%.
Frankfurt’s DAX 30 lost 0.6% and the Paris CAC 40 fell 0.7%.
Investors are also cutting their risk exposure ahead of a May US jobs report and the outcome of meetings by the Opec oil cartel and the European Central Bank today.
“Market participants are making the choice to pocket their gains ahead of big macroeconomic events at the end of this week,” said analyst Yoav Nizard at FXCM currency brokerage.
Wall Street was down approaching midday, with the Dow sliding 0.3%.
In Tokyo, the main stocks index slumped 1.6%, snapping a five-day winning streak, as the yen surged on news that Japan’s prime minister would delay a sales tax rise that threatened the nation’s fragile economy.
Shinzo Abe said the rise to 10% from 8%, planned for next year, would now be pushed back by more than two years to late 2019.
Meanwhile the euro and dollar jumped against the pound.
“In a case of deja vu...two further Brexit polls have weighed on the pound, as the currency’s sensitivity seemingly increases as the referendum date approaches,” said XTB analyst David Cheetham.
In late afternoon London trading, the pound was at $1.4413, down from $1.4478 late in New York on Tuesday.
Chinese stocks were lacklustre yesterday as the nation released official manufacturing data for May.
The official Purchasing Manager’s Index (PMI), which tracks activities in factories and workshops, came in at 50.1.
Any reading above 50 signals expanding activity, while anything below indicates shrinkage, but Julian Evans-Pritchard of Capital Economics said readings for May were “underwhelming”.
“Although they suggest that activity held up reasonably well last month, they also offer few signs of improvement,” he said.
China’s economy, the world’s second-largest, is a vital driver of global expansion, and investors watch the PMI figure closely as the first available indicator each month of how well the economy is doing.
The key manufacturing sector has been struggling for months in the face of sagging global demand for Chinese products.
In London, the FTSE 100 down 0.6% at 6,191.93 points; Frankfurt - DAX 30 down 0.6% at 10,204.44 points and Paris - CAC 40 fell 0.7% at 4,475.39 points at the close yesterday.