News Column

French data hits European stocks; Iraq keeps oil high

June 24, 2014

Gold slips further from two-month high but stays above $1,300

European shares fell on Monday after eurozone business activity data showed growth slowing, with France a notable laggard, in contrast with upbeat numbers from China that lifted Asian shares and the Australian dollar.

Brent crude oil prices topped $115 a barrel on concerns that unrest in Iraq, where insurgents seized control of strongholds along the Syrian border over the weekend, could disrupt supply.

The pan-European FTSEurofirst 300 stocks index fell 0.3 per cent, although it held close to Friday's six-and-a-half year high.

Wall Street looked set for a flat open. The S&P 500 and Dow Jones closed at record highs on Friday.

"The market doesn't like at all the French PMIs, and the German data is also disappointing. It eclipses the upbeat Chinese data from overnight and it's a reminder that the latest ECB measures are not magic," Saxo Bank trader Andrea Tueni said.

"The overall picture is one of fairly sluggish growth as opposed to any rip-roaring acceleration," Markit chief economist Chris Williamson said.

Earlier, the corresponding number for France fell to 48.0 from May's 49.3 slipping further below the 50 level that separates expansion from contraction. Germany's PMI showed its private sector expanded for the 14th consecutive month in June.

The euro inched lower after the German data and was last down 0.2 per cent on the day at $1.3580. European Central Bank President Mario Draghi suggested in a weekend interview that interest rates would stay low at least until the end of 2016.

"The PMI surveys say roughly the same thing as Draghi's comments over the weekend: policy will stay very accommodative in Europe for a long time to come," said a London bank dealer.

Earlier, the HSBC/Markit Flash China PMI showed factory sector activity expanded for the first time in six months in June.

"This month's improvement is consistent with data suggesting that the authorities' mini-stimulus is filtering through to the real economy," said Qu Hongbin, chief economist for China at HSBC, referring to a series of measures announced by the government in recent months to spur activity.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.5 per cent but later gave up the gains. Tokyo'sNikkei index hit a five-month closing high as the China data added to the positive mood arising from a dovish statement after a US Federal Reserve meeting last week.

The Australian dollar, which closely tracks the economy of Australia's top export market China, rallied. It gained 0.5 per cent to $0.9439, touching the day's of $0.9444, within reach of 2014's peak of $0.9461 hit in April.

The dollar slipped 0.2 per cent to 101.85 yen.

Brent crude oil last stood at $114.89 a barrel, just short of a nine-month high hit on Friday.

"Oil prices remain a risk. Brent has been trading above $115/bbl, as the security crisis in Iraq continues to deepen," Barclays said in a report.

The China numbers helped nudge longer-term eurozone government bond yields higher, though ECB chief Draghi's comments supported short-term debt. Benchmark two-year German yields edged down to 0.036 per cent.

Gold slipped further from a two-month high, though safe-haven demand related to Iraq kept it above $1,300 an ounce. It was last at $1,312.

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Source: Khaleej Times (United Arab Emirates)

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