Shares begin the month on highs as PMIs level to an financial restoration

© Reuters. FILE PHOTO: People walking by wearing face masks appear on a screen showing stock prices outside of a Tokyo broker


LONDON (Reuters) – Shares got off to a positive start in September. Global indices were nearing all-time highs and Europe was rising, thanks to Chinese factory data showing a recovery in demand.

Factory activity in China grew at the fastest rate in nearly a decade in August, a private PMI poll on Tuesday found, as opposed to an official poll on Monday that found production at the country's factories last month grew a little slower as the floods hit the southwest.

Both surveys showed an improvement in export orders.

The MSCI World Equity Index, which tracks stocks in 49 countries, was near its highest level ever, while the pan-European index rose 0.2% at 029 GMT.

France's Cac 40 rose 0.4% and Germany's 0.6%. 100 lagged 0.9%.

European stocks had opened even higher but earnings dampened after the federal government revised its GDP forecast for 2021.

PMI data from across Europe showed that manufacturing activity in general is on the recovery path, although factory managers are cautious about investing and hiring more workers.

In Germany, Europe's largest economy, production grew the fastest since February 2018, while it shrank in France.

The euro area economy rebounded sharply in the third quarter, although the latest incoming data was less robust, said Luis de Guindos, vice president of the European Central Bank.

The euro rose 0324 GMT to a two-year high of $ 1.19975. At 8:00 a.m. GMT, it was at $ 1.199, up 0.4% since the New York close when the dollar sell-off continued.

Against a basket of currencies, the dollar fell 0.4% to 91.8811 at 0810 GMT, falling below 92 for the first time since May 2018.

Investors are betting that US rates will stay lower for longer after Federal Reserve Chairman Jerome Powell outlined an accommodative change in the central bank's approach to inflation on Thursday.

Eurozone inflation data for August is due at 9:00 a.m. GMT and is expected to drop to 0.2%, according to a Reuters poll.

Commerzbank (DE 🙂 analyst Esther Reichelt said inflation data underscores the difference between the Fed and the ECB.

"While the market believes that the Fed is in a position to revive inflation rates by keeping interest rates lower for longer than previously assumed, this no longer appears to be the case for the ECB," she wrote in a press release the customer.

"The August inflation data released today will once again underscore how far the ECB will miss its inflation target.

"Just as higher inflation harms the dollar, the euro benefits from lower inflation – if monetary policy is unwilling (or unable) to do anything about it."

Paul Donovan, chief economist at UBS Global Wealth Management, said Tuesday data is likely to have limited impact as "markets believe interest rates will stay low longer and price data is unlikely to change that."

Bond yields in the core zone of the euro zone rose by 1 to 2 basis points, with the German 10-year reference yield at -0.386%.

Oil prices rose, reversing the losses overnight.

Futures rose 57 cents to $ 45.85 a barrel at 0805 GMT. US West Texas Intermediate (WTI) crude oil futures rose 56 cents to $ 43.17 a barrel.

Gold prices also rose to their highest level in two weeks.

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