European stock markets rose Wednesday on the eve of an expected interest-rate cut by the European Central Bank, but Wall Street was mixed as investors digested data that could influence the Federal Reserve’s own monetary policy.
The Dow fell while the S&P 500 and tech-heavy Nasdaq rose in morning deals after payroll firm ADP said job gains in the US private sector slowed again in May, in a further sign that the world’s top economy might be cooling.
Employers added 152,000 jobs last month due to a steep decline in manufacturing, down from a revised 188,000 figure in April and less than analysts anticipated, the report said.
Investors have been concerned that the US central bank will keep interest rates higher for longer, but a softer labour market could give the Fed more confidence to pivot to cuts sooner than feared.
While the Fed has yet to ease its monetary policy, the Canadian central bank decided Wednesday to slash its own rate to 4.75 percent.
In European markets, London, Paris and Frankfurt rose, with the ECB forecast to start cutting eurozone borrowing costs from historic highs on Thursday, although sticky inflation means the move is unlikely to kickstart a rapidly easing cycle.
“Thursday’s ECB announcement is shaping up to be the main event this week,” said Matthew Ryan, head of market strategy at global financial services firm Ebury.
“We think that a first 25-basis-point cut remains essentially guaranteed,” he added.
“We expect the ECB to maintain its data-dependent approach and await confirmation of the downtrend in inflation before committing to additional cuts. This could lead to a relatively muted response in financial markets.”
Asian indices closed lower as optimism that the Fed would cut interest rates before the end of the year was eclipsed by resurfacing fears over the health of the US economy.
Fears of persistent economic weakness have moved to the fore as a manufacturing index showed Monday that US activity contracted for a second successive month in May.
On Tuesday, official data showed job vacancies slipped to just under 8.1 million in April, 300,000 fewer than a month earlier, and well below market expectations.
That suggested a long-running period of high inflation and borrowing costs was taking its toll on the US economy.
The figures come ahead of closely watched non-farm payrolls figures due Friday, which will provide a much clearer snapshot for the US central bank ahead of its policy decision next week.
Readings below forecasts have for some time been taken as a positive, because they were seen as pointing to an economy still in good health but slowing enough to give the Fed room to start cutting rates — known as a “Goldilocks” situation.
Bets on a Fed rate cut before the end of the year have picked up, with some eyeing September as the lift-off point.
Oil prices rose Wednesday after recent hefty losses, as investors continue to digest the OPEC+ alliance of major crude producers’ decision to begin winding back output cuts from October and through next year.
– Key figures around 1400 GMT –
New York – Dow Jones: DOWN 0.3 at 38,597.08 points
New York – S&P 500: UP 0.2 percent at 5,303.37
New York – Nasdaq: UP 0.8 percent at 16,985.24
London – FTSE 100: UP 0.2 percent at 8,248.43
Paris – CAC 40: UP 0.9 percent at 8,005.69
Frankfurt – DAX: UP 0.8 percent at 18,543.98
EURO STOXX 50: UP 1.5 percent at 5,028.15
Tokyo – Nikkei 225: DOWN 0.9 percent at 38,490.17 (close)
Hong Kong – Hang Seng Index: DOWN 0.1 percent at 18,424.96 (close)
Shanghai – Composite: DOWN 0.1 percent at 3,087.56 (close)
Dollar/yen: UP at 156.22 yen from 154.88 yen on Tuesday
Euro/dollar: DOWN at $1.0873 from $1.0883
Pound/dollar: UP at $1.2773 from $1.2772
Euro/pound: DOWN at 85.12 pence from 85.19 pence
West Texas Intermediate: UP 0.4 percent at $73.53 per barrel
Brent North Sea Crude: UP 0.4 percent at $77.84 per barrel
burs-lth/rlp
