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Global stocks shrug off China data, Fed weighs on markets

Published 14/09/2015, 09:34
© Reuters. Investors talk in front of an electronic board showing stock information at a brokerage house in Shanghai
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By Nigel Stephenson

LONDON (Reuters) - Stocks rose on Monday, shrugging off tepid Chinese economic data while the dollar weakened before a U.S. Federal Reserve decision on whether to raise interest rates for the first time since 2006 later this week.

Oil prices fell again on falling demand which analysts said could take a further hit if interest rates rise in the world's biggest economy.

The combination of worries about slowing growth in China and higher U.S. borrowing costs have weighed on markets for weeks, becoming more acute as this week's Fed meeting has approached.

A Reuters poll on Friday showed a small majority of forecasters still expect a Fed hike on Thursday, though markets-based models suggest policy tightening will be delayed.

Growth in Chinese investment and factory output in August lagged forecasts and, after weak trade and inflation data last week, made it more likely that third-quarter economic growth may dip below 7 percent for the first time since the financial crisis. Only retail sales beat forecasts.

Shares fell in China and Japan, though MSCI's main index of Asia-Pacific stocks, excluding Japan, rose 0.5 percent and European shares followed them higher.

The pan-European FTSEurofirst 300 index rose almost 1 percent with Britain's FTSE 100 index up 1.2 percent.

China's Shanghai Composite index dropped 2.8 percent and the CSI 300 index of the biggest listed companies in Shanghai and Shenzhen lost 2 percent. Tokyo's Nikkei closed down 1.6 percent.

The dollar dipped against the yen, falling 0.3 percent to 120.24 yen but and was steady against the euro at $1.1341.

"If there is an uncertain world, if China is slowing aggressively, then you have a situation where the Fed may well reconsider raising interest rates," said Bank of New York Mellon (NYSE:BK) FX strategist Neil Mellor in London.

"What we're seeing is a general back-off from the view that the Fed is raising rates."

In emerging markets, Turkey's lira fell to a record low of 3.064 to the dollar

Oil prices fell nearly 1 percent on the prospect of dwindling demand, though reduced U.S. drilling, as measured by a rig count, offered some support.

Brent crude, the global benchmark, was down 44 cents at $47.70 a barrel.

"Both the supply and demand pictures look less favourable over the coming months ... Outside the U.S., oil fundamentals appear to be slipping seasonally," Morgan Stanley (NYSE:MS) said on Monday.

Broadly stronger stocks weighed on core government debt. German 10-year Bunds, the euro zone benchmark, rose 1 basis point to 0.66 percent while U.S. 10-year Treasuries yielded 2.19 percent, up from 2.18 percent at Friday's New York close.

Copper turned lower in London on worries over China and the Fed. Three-month copper on the London Metal Exchange slipped by 1 percent to $5,316.50 a tonne.

© Reuters. Investors talk in front of an electronic board showing stock information at a brokerage house in Shanghai

Gold held steady at around $1,107 an ounce.

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