World stock indexes dipped yesterday after services sector data in China and the United States revived concerns about slow growth, while gold climbed to its highest in three weeks.
US Treasuries prices rose after the US data raised questions about whether the Federal Reserve might slow its reduction of bond purchases.
The private index of US service industry activity unexpectedly fell in December. It goes against recent US data, including last week’s factory activity report, that confirmed underlying strength in the economy and suggested the Fed was justified in deciding in December to begin scaling back its stimulus programme.
Outside the United States, figures showing that China’s services sector growth slowed sharply last month added to a stack of disappointing data from the world’s second-largest economy over the past week.
MSCI’s world stock index, whichtracks 45 countries, was down 0.2 per cent, while all three major US stocks indexes were lower.
The Dow Jones industrial average fell 7.9 points or 0.05 per cent, to 16,462.09, the S&P 500 lost 2.6 points or 0.14 per cent, to 1,828.77 and the Nasdaq Composite dropped 14.677 points or 0.36 per cent, to 4,117.229.
Traders are still second-guessing the Fed’s assessment of recent economic data and how it might alter the US central bank’s plan to withdraw its quantitative easing stimulus, said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.
“On balance, today’s data is not going to raise concerns the Fed may accelerate the taper,” he said.
Tomorrow’s impending release of the minutes of the December meeting of Fed policymakers and Friday’s non-farm payrolls data could give further clues on how quickly the Fed is likely to scale back its huge stimulus programme in the coming months.
The US and Chinese data was somewhat offset by positive euro zone data and other US data that was upbeat. Data showed some signs of gradual recoveries in Italy and Spain, while a report showed a rebound in new orders for US factory goods.
Still, the pan-regional FTSEurofirst 300 ended down 0.2 per cent after erasing earlier gains.
The euro zone Composite Purchasing Managers Index, which gauges how thousands of manufacturing and services companies fare every month, rose to 52.1 in December, in line with forecasts, with readings above 50 indicating growth.
The dollar slipped against the euro and yen after the weaker-than-expected data gauging the US services sector.
The euro recovered from a one-month low to trade 0.4 per cent higher at $1.3638, while the dollar was last down 0.2 per cent to 104.64 yen, according to Reuters data.
In the US bond market, US Treasuries prices rose after the US services sector data spurred bids for government debt.
The benchmark 10-year US Treasury note rose 8/32 in price to yield 2.965 per cent, down three basis points from late on Friday.
“We had a run of stronger-than-expected data in December that pushed the 10-year yield above three per cent. We are now seeing some weaker data so we are seeing it falling below three per cent,” said Stan Shipley, bond strategist at ISI Group in New York.
There was plenty of evidence to support the caution China data has fostered among investors.
Figures yesterday showing China’s huge services sector slowed sharply in December to its lowest point since August 2011 came hot on the heels of a similar official survey on Friday and two other PMIs last week showing factory activity also soured.
Gold rose to its highest in three weeks, as declines in the dollar and equity markets drew investors to the asset.
Spot gold was trading up 0.4 per cent at $1,241.40 an ounce, having earlier hit a one-week high of $1,248.30.
Brent crude oil edged higher as reports of restarted production at a Libyan oilfield, which hinted at more supply, were outweighed by doubts about its ability to reach markets.
Brent crude futures for February rose three cents to $106.92 after earlier climbing over $1 to a session high of $107.96. US crude fell 54 cents to $93.42 per barrel. The contract lost $1.48 a barrel on Friday and posted its biggest weekly drop since June 2012.
“We’re still seeing most of the geopolitical risk hitting Brent, whether it be Libya or Iraq,” said Phil Flynn, analyst at the Price Futures Group in Chicago.