European stocks slide; euro, gold rise

February 04, 2014 - 1:19:22 am

LONDON: European stocks tumbled yesterday as lacklustre reports on Chinese and US manufacturing activity outweighed the eurozone hitting a 32-month high in January.

London’s benchmark FTSE 100 index ended the day down 0.69 percent at 6,465.66 points, while Frankfurt’s DAX 30 dropped 1.29 percent to 9,186.52 points and the CAC 40 in Paris fell 1.39 percent to 4,107.75 points.

Milan tumbled 2.63 percent and Milan gave up 1.96 percent.

The European single currency rose to $1.3529 from $1.3487 late in New York on Friday.

Gold climbed to $1,262 an ounce from $1,251 an ounce on Friday on the London Bullion Market.

Investors were also keeping a leery eye on emerging markets that have been buffeted by tightening US monetary policy.

The Turkish lira slid to 2.2738 to the dollar and 3.0747 to the euro, below the level where Turkey’s central bank hiked interest rates last week.

European stocks briefly advanced after Markit Economics said its eurozone Purchasing Managers Index (PMI), a leading indicator of growth, rose to 54 points in January from 52.7 in December, moving further into positive territory above the 50-points boom-or-bust line.

That was a 32-month high, bolstered by a pick up in Spain and even Greece moving into positive territory for the first time since August 2009. France also saw an improvement, but at 49.3 points was still in negative territory.

European stocks followed US stocks down after the Institute for Supply Management’s purchasing managers index showed US manufacturing sector growth slowed sharply in January.

The ISM index sank to 51.3 from 56.5 last month, while new orders component plunged to 51.2 from 64.4, and production slowed almost as steeply, to 54.8 from 61.7, although that data was likely affected by the severely cold weather that gripped the country in January.

“The dreadful weather seems to have had a marked impact on the US manufacturing ISM index, which should bounce back from today’s bad reading over the coming months,” said analyst Robert Wood at Berenberg bank.

“The disappointing ISM result does not seem to reflect emerging market worries,” he added.

In midday trading, the Dow Jones Industrial Average fell 1.15 percent to 15,518.26 points, while the broad-based S&P 500 slumped 1.29 percent to 1,759.66, and the tech-rich Nasdaq Composite Index shed 1.39 percent to 4,046.85.

Asian shares mostly sank in holiday-thinned trade after official Chinese data pointed to a slowdown in manufacturing activity in the world’s number two economy and key driver of global growth.

Tokyo stocks sank 1.98 percent and Seoul slid 1.09 percent, but Shanghai, Hong Kong, Taipei and Kuala Lumpur were shut for the lunar new year holiday.

China’s PMI index fell to 50.5 in January from 51 in December and 51.4 in November, the National Bureau of Statistics and the China Federation of Logistics and Purchasing said. 

Last week’s decision by the US Federal Reserve to slash its bond-buying programme by $10bn  to $65bn a month has renewed worries over emerging markets.  The Fed’s cutback sent emerging market currencies plunging in India, South Africa and Turkey, despite a raft of interest rate hikes, as traders fretted over vast outflows of capital from their economies.

Data from US-based fund analysts EPFR Global showed investors pulled a total of $12.2bn out of equities in emerging markets during January.

That included a record weekly outflow of $6.3bn from emerging market equities in the week to January 29, according to EPFR.

AFP

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