LONDON, Jan 24 (Reuters) – The euro held on to a nine-month high against the U.S. dollar, while global stocks tumbled from multi-month highs on Tuesday after reasonable data on European business activity and a raft of corporate earnings kept risk appetite buoyant.
Business activity in the euro zone unexpectedly returned to growth in January, a survey showed, the latest sign that the bloc’s recession may be less severe than feared.
The S&P Global Composite Purchasing Managers’ Index (PMI) climbed to 50.2 this month from 49.3 in December, breaking the 50 mark for the first time since June.
However, the UK’s composite purchasing managers’ index (PMI) fell to 47.8 in January from 49.0 in December, the lowest level since January 2021.
The MSCI World Index (.MIAPJ0000PUS) rose 0.1% and hit a fresh seven-month high, while Europe’s Stoxx 600 (.STOXX ) steadied after gains overnight in the U.S. and parts of Asia earlier in the day.
The MSCI World Index is up about 7 percent since the start of the year, thanks to hopes that central banks around the world are coming to an end to their interest rate hike programs and economic data fueling optimism.
Britain’s FTSE 100 (.FTSE) fell 0.4 percent, underperforming Europe’s broader market, as domestically-focused midcaps (.FTMC) pared early gains after PMI data came close to flat.
Most markets in Asia were closed for a second straight day for the Lunar New Year, but Japan’s Nikkei (.N225) closed at its highest in more than a month, erasing all losses since the Bank of Japan’s surprise policy change last month. Australian shares also rose. (.AXJO)
“We’re still very focused on the Fed right now, with a meeting next week. The market is very optimistic that there will be two rate cuts before the end of the year, and I think that’s what’s keeping the mood in the market right now,” said Fiona Cincotta, an analyst at Cityindex. (Fiona Cincotta) said.
“We’re looking at the U.S. PMI today,” she added.
The Federal Reserve’s rate-setting committee begins a two-day meeting on Feb. 1. Inflation has started to retreat in recent months and signs of a slowdown in the U.S. economy could lead the Fed to start considering its next move after a series of rate hikes last year.
The day’s corporate earnings heavyweight is Microsoft, which is due to report after the market closes.
Results in the U.S. and Europe will help guide investors on whether the renewed optimism about the economy that has lifted stocks in recent weeks is grounded in reality.
Hopes for a better economic outlook in Europe also weighed on currency markets, which, coupled with suggestions that the Federal Reserve would slow the pace of rate hikes faster than the European Central Bank, continued to underpin the euro and other neighboring currencies.
The European common currency was steady at $1.0865, just off a nine-month high of $1.0927 touched the previous day. Sterling turned lower after the UK data, falling 0.25% to $1.234, off Monday’s seven-month high.
That left the dollar index near a six-month low at 102.04.
Global government bonds edged higher, with the benchmark US 10-year yield falling 3 basis points to 3.4913%. Germany’s 10-year bond yield fell 1 basis point to 2.18%.
Yield is inversely related to price.
Oil prices have largely held on to recent gains on optimism over China’s reopening. Brent crude fell 0.1 percent to $88.1, just off Monday’s near eight-week high of $89.09.
Gold rose 0.2%, having hit a fresh nine-month high earlier, as the precious metal continued to be helped by a weaker dollar.
Edited by Christina Finch
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