Global stocks fall despite positive economic data in the United States, the dollar appreciates

NEW YORK, June 1 (Reuters) – Global stocks tumbled and the U.S. dollar rose on Wednesday after stronger-than-expected economic data failed to ease investor concerns about high inflation and a looming recession due to part of the rise in oil prices.

A report by the Institute for Supply Management (ISM) showed that US manufacturing activity picked up in May as demand for goods remained strong even as prices rose.

The survey follows data released last Friday showing that US consumer spending, the biggest contributor to US economic output, rose in April, even amid growing concerns of a recession. Read more

However, market sentiment remained bearish due to ongoing uncertainty caused by the pace of US Federal Reserve interest rate hikes and the impact of the Russian-Ukrainian war on food prices and raw material.

“There is a lot of uncertainty. The market is climbing a wall of worry and there is cause for concern,” said Michael Ashley Schulman, chief investment officer at Running Point Capital in Los Angeles.

“If we have a recession, it would be strange and unusual with near full employment, businesses still hiring and huge demand,” Schulman added.

The MSCI World Equity Index (.MIWD00000PUS), which tracks stocks from 50 countries, fell 0.81%. The pan-European STOXX 600 index fell 1.04%.

US Treasury yields rose in choppy trading. Benchmark US 10-year yields hit a two-week high of 2.9149%, while two-year yields also climbed to a two-week high of 2.6517%.

On Wall Street, all three major indexes ended lower, led by stocks in the financials, healthcare, technology and consumer discretionary sectors.

The Dow Jones Industrial Average (.DJI) fell 0.54% to 32,813.23, the S&P 500 (.SPX) lost 0.75% to 4,101.23 and the Nasdaq Composite (.IXIC) fell by 0.72% to 11,994.46.

“Rising interest rates and inflation only compress valuations. You can like a company and it can be good and can continue to make a profit, but the valuation still has to come down because your interest rate of base increases,” Schulman added.

POWERFUL DATA

Oil prices continued to strengthen following European Union leaders’ decision to phase out Russian oil even as China ended its strict COVID-19 lockdown in Shanghai, which could boost demand for rough in an already tight market. Read more

Brent crude rose 0.18% to $115.81 a barrel, while U.S. West Texas Intermediate crude gained 0.04% to $114.72.

The US dollar appreciated against the euro, helped by upbeat economic data in the United States, and while the common currency remained under pressure following the highest inflation on record in the euro zone, which has raised concerns about the region’s growth prospects. Read more

The dollar index rose 0.786%, with the euro falling 0.79% to $1.0648.

Gold prices rose slightly from a two-week low, supported by concerns over rising inflation, although a stronger dollar and rising US yields limited gains.

Spot gold gained 0.5% to $1,845.70 an ounce, while US gold futures gained 0.28% to $1,847.90 an ounce.

Reporting by Chibuike Oguh; Editing by David Holmes and Bill Berkrot

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