LONDON, Sept 5 (Reuters) – Global stocks balked on Tuesday as weak services sector data from China and Europe reignited concerns about the global economy, while the Australian dollar weakened as Australia’s central bank kept interest rates on hold. It fell.
China’s services sector expanded at the slowest pace in eight months in August, a private sector survey showed on Tuesday, as weak demand continues to plague the world’s second-largest economy.
Data from the euro zone and the UK also showed a decline in business activity in August, with key service industries in both regions in contraction.
European stock indexes were mixed, with the pan-European benchmark STOXX600 (.STOXX) little changed.
Germany’s DAX (.GDAXI) and France’s CAC40 (.FCHI) fell 0.1% and 0.2%, respectively, while the UK’s FTSE 100 (.FTSE) rose 0.1%.
This followed weakness in Asian markets, with MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) down 1.1%, away from its three-week high hit on Monday.
As a result, the MSCI World Stock Index (.MIWD00000PUS) fell 0.2%, with Wall Street futures indicating a negative open.
“The decline in China’s Caixin services PMI offset some of the change in sentiment that occurred yesterday,” said Charu Chanana, market strategist at Saxo in Singapore.
Still, investors are hopeful that the Chinese government’s drip-feeding supply of policy stimulus will be enough to stabilize China’s economy.
“It feels like China is tinkering around the corner and perhaps doing something more substantive,” said Dan Boardman Weston, CEO and chief information officer of BRI Wealth Management. It will need to be done.”
“They clearly want to clean up the property sector and prevent moral hazard from infiltrating the system, but I am surprised that the policy easing so far seems weak.”
The US dollar strengthened after disappointing global economic data, while Australia’s central bank kept interest rates unchanged at 4.10% and said recent data was consistent with inflation returning to normal. As a result, the Australian dollar fell more than 1.5% to $0.6364, its lowest since November. The target range for the second half of 2025 is 2-3%.
“The important last paragraph is essentially unchanged, and the hawkish bias remains, but the willingness to act on this bias unless forced by data… It’s clear that there isn’t.”
By exporting to China, Australia also acts as a floating agent for renminbi.
Meanwhile, the euro fell 0.6% to $1.0729, the lowest in three months, and the Japanese yen fell 0.5% to $147.33, a level that prompted intervention from the Japanese authorities last year.
The dollar index, which measures the value of the U.S. currency against six rival currencies, rose to 104.75, the highest since March.
U.S. markets were closed for the holiday on Monday, and trading volumes were low. Little is clear about the region’s economic calendar, but several Federal Reserve officials are scheduled to speak later this week.
U.S. job growth accelerated in August, but the unemployment rate rose to 3.8% and wage growth slowed, according to Friday’s data. A slight crack in the labor market has raised expectations that the Fed is likely to finish raising interest rates.
The market has priced in a 93% chance that the Fed will keep interest rates on hold later this month, according to LSEG data.
Also, after a series of weak data, the market is now leaning towards a rate hike at the European Central Bank’s September meeting.
In commodities, U.S. crude oil fell 0.3% to $85.27 per barrel, and Brent crude oil fell 0.7% on the day to $88.36, but both remain near year-to-date highs.
“It will be interesting to see how rising oil prices start to shape the inflation story again,” BRI board member Weston said.
“If inflation starts to pick up again, the Fed may need to raise rates more than expected,” the board’s Mr. Weston added.
Reporting by Samuel Indyk and Ankur Banerjee. Editing: Stephen Coates, Kim Coghill, Christina Fincher, Shounak Dasgupta
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