Global shares turn flat as sentiment wanes

LONDON (Reuters): Global shares were steady yesterday as a weak euro zone sentiment survey and political uncertainty in the wake of Spain’s elections proved a drag on earlier gains driven by strong economic data out of China and the US.

The MSCI All-Country World Index of shares, which tracks stocks in 47 countries, was flat in early afternoon trade in London, giving up earlier gains of as much as 0.06%.

US stock futures pointed to a subdued open on Wall Street.

European shares, which had firmed at the open, were hit by uncertainty related to the formation of a government in Spain and weak euro zone economic sentiment data that exacerbated fears over slowing global growth. The pan-European STOXX 600 index was down 0.2%.

Spain’s IBEX 35 index underperformed peers, falling as much as 0.8%, and Spanish government bond yields dipped after Prime Minister Pedro Sanchez overcame a challenge from right-wing nationalists in elections on Sunday.

Shares in Italian banks got a boost and Italian government bonds rallied after S&P Global affirmed Italy’s sovereign credit rating.

Still nagged by uncertainty over the outlook for the global economy, investors were looking to a meeting of the US Federal Reserve this week and Chinese factory data for further clues on policy direction in the world’s biggest economies.

“For stock traders, it seems that the important catalysts are pointing higher: the US sees strong domestic growth, low inflation keeps the Fed at bay and could potentially trigger a rate cut so it seems that equities have nowhere to go but higher – at least in the short term,” said ADSS Research Head Konstantinos Anthis.

Chinese blue-chips rose over 1% after losing 5.6% last week, leading Shanghai shares to an intraday high in afternoon trade.

In China, fresh data showed industrial profits grew in March after four months of contraction, but analysts said sentiment remained fragile. Economists polled by Reuters expect factory activity in the world’s second largest economy to grow at a steady but modest pace in April.

In contrast with weakness in Asian markets last week, Wall Street ended Friday on a high note, propelled by GDP figures.

Australian shares were down 0.4% after hitting an 11-year closing high on Friday, while Seoul’s KOSPI was up 1.4%.

Japan’s financial markets are closed for a long national holiday this week, but the Nikkei 225 futures index in Singapore was 0.9% higher.

US Gross Domestic Product grew at a 3.2% annualised rate in the first quarter, although some analysts sounded a cautious note. “The details (of the GDP release), however, were distinctly less impressive with underlying domestic demand growing only 1.3%, the slowest rate since 2015,” said Kingswood Research Head Rupert Thompson.

“Given this mixed picture, this coming week’s spate of US data releases will be of heightened importance for markets.”

The March reading for core personal consumption expenditures (PCE), the Fed’s favoured inflation measure, was due later yesterday. The Central Bank’s Federal Open Market Committee (FOMC) will announce its policy decision tomorrow, with Chairman Jerome Powell expected to balance the strong domestic growth data against persistent concerns over the global outlook.

Markets will also be looking to global factory activity surveys this week, particularly official and private readings on Chinese manufacturing which will both be released today.

Currency markets were calm. The dollar was 0.2% higher against the yen at $ 111.74, and the euro was up 0.1% at $ 1.1162.

The dollar index, which tracks the greenback against a basket of six major rivals, was nearly flat at 98.039.