Global shares snap losing streak as oil ends its decline

Gains in Europe helped pull world shares out their longest losing streak of the year on Thursday as oil prices rose before key US jobs data.

Markets were juggling a host of issues, including lacklustre data from Asia’s two biggest economies, the ousting of Brazil’s president and signs that Spain’s political impasse would continue. Nevertheless, risk appetite was slowly re-emerging.

Europe’s main stock markets gained 0.4 to 0.7 per cent to help MSCI’s All World index end six days of losses, its longest since the start of January.

Commodity companies were among the leaders as oil took back some of the 8 per cent it had lost this week, a decline that accelerated on Wednesday after data showed US crude and distillate stockpiles increased more than expected.

Brent crude futures rose to $47.08 per barrel, after falling almost 3 per cent overnight. US crude gained 0.5 per cent to $44.92 after shedding 3.6 per cent on Wednesday. Its gain for August was 7 per cent.

Factories

After disappointing data from Asia, European surveys showed euro zone manufacturing growth slowed, although Britain staged one of its sharpest rebounds on record as factories recovered from June’s vote to leave the EU. The pound rose more than a cent to $1.3250, which put it on course for its best day in two weeks.

“[British] companies reported that work that had been postponed during July had now been restarted as manufacturers and their clients started to regain a sense of returning to business as usual,” Markit economist Rob Dobson said.

The British data also helped to nudge European bond yields higher. Spanish government bond yields touched a three-week high of 1.026 per cent after acting prime minister Mariano Rajoy lost a vote of confidence in parliament, raising the prospect of a third election in a year.

Friday's US non-farm payrolls report remains this week's market focus after Federal Reserve vice-chairman Stanley Fischer said last week the jobs data would be a factor in the timing of central bank interest rate hikes.

Employers are expected to have added 180,000 jobs in August, according to the median estimate of 89 economists polled by Reuters.

The ADP National Employment Report on Wednesday showed US private employers adding 177,000 jobs in August, above the 175,000 forecast by a Reuters survey of economists.

The dollar’s gains were tempered after the Institute for Supply Management-Chicago said its business barometer dropped 4.3 points to 51.5 in August, short of expectations.

Overnight low

Spot gold slipped 0.1 per cent to $1,307.80 an ounce, moving back towards its overnight low of $1,304.91, which was its lowest level since June 24th.

In Asia overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan ended down 0.2 per cent, while Australia’s S&P/ASX 200 index shed 0.3 per cent.

One of the drags was private-sector data showing that Chinese manufacturing activity stagnated in August. Growth in output and new orders slowed, and companies shed staff for the 34th month in a row.

In Japan, manufacturing activity showed signs of steadying, but the HIS Markit/Nikkei PMI remained below the 50 mark that separates expansion from contraction, edging up to 49.5 in August from 49.3 in July.

Output grew for the first time in six months, but export orders fell again, bolstering expectations the Bank of Japan will need to offer more stimulus to revive the sputtering economy. Japan’s Nikkei stock index ended up 0.2 per cent.

The dollar was up 0.1 per cent at 103.51 yen, not far from Wednesday’s 103.54, its highest in more than month. The euro slipped to $1.1148.

“There are still some sceptics who are still not convinced that the Fed will take action [on rates] again this year,” said Antje Praefcke, currency strategist at Commerzbank.

"They have been misled by the Fed one too many times over the past few months in their hope for a rapid rate hike cycle following the lift-off." - Reuters