European shares fell yesterday despite strong eurozone factory data, after a delay to a keenly awaited US tax reform bill curbed appetite for the dollar and was set to cool a rally on Wall Street.
Eurozone shares, which started to accelerate losses about half an hour before the release of the data, fell as much as 1.2 per cent to session low before stabilising down about 0.7 per cent.
A purchasing managers’ index showed that eurozone factories had their busiest month for more than 17 years in November and raised prices at the fastest rate in more than six years.
Forward-looking indicators suggested the momentum would continue to the end of 2017, capping what is expected to be the best year for eurozone economic growth in a decade.
The DAX, Germany’s top share index, fell as much as 1.6 per cent to hit its lowest level in around nine weeks before paring losses as the euro eased from the day’s highs.
Traders also pointed to month-end index re-weighting and shifts in positioning to explain the moves, which could be exacerbated by thinner trading volumes.
The single currency fell back from the day’s highs of $1.1940 to trade at $1.18980, down 0.06 per cent on the day.
The gap between German 10-year and 30-year borrowing costs was at its tightest level since late August as a lower-than-expected eurozone inflation number on Thursday pushed back prospects for monetary policy tightening well into the future.
Futures on S&P fell 0.4 per cent and those on the Down Jones declined 0.3 per cent. Futures on tech heavy index Nasdaq declined 0.7 per cent.
The MSCI World Index, which tracks stocks from developed economies, slid 0.2 per cent. Japan’s Nikkei had finished 0.4 per cent higher, while MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent on the day.
The dollar index against a basket of six major currencies was flat at 93.030 but poised to eke out some gains for the week, supported by oil prices, after Opec and other major producers agreed to extend production curbs.
Brent was trading at $63.33, up 63 cents on the day. United States light crude was up 50 cents at $57.91.
“This outcome was widely expected, but its confirmation has removed a clear near-term downside risk to prices,” said Gordon Gray, head of oil and gas equity research at HSBC.