Signs of fading economic growth drag markets lower; job figures disappoint
LONDON — Global financial markets turned lower on Thursday as disappointment over weak economic indicators in the world's major economies offset hopes for more stimulus from central banks.
The U.S. Labor Department said the four-week average for people seeking unemployment assistance rose 4,000 last week to 372,000. It was the second straight week of increases and provided more evidence that the job market's recovery remains tentative.
The jobs figures cast a pall over markets, which had been rising since the previous day's publication of the minutes to the Federal Reserve's last policy meeting, which showed U.S. central bankers favor further stimulus.
Germany's DAX closed 1 percent lower at 6,949.57, while France's CAC 40 shed 0.8 percent to 3,432.56. Britain's FTSE 100 ended flat at 5,776.60.
Wall Street traded lower, with the Dow falling 0.6 percent to 13,090.09 and the broader S&P 500 dropping 0.5 percent to 1,407.15.
Economic indicators were weak in other parts of the world, too.
In China, a preliminary reading of manufacturing activity indicated that government stimulus efforts have not been able to neutralize global headwinds. HSBC's manufacturing purchasing managers' index (PMI) fell to a nine-month low of 47.8 in July, as weak global demand hit Chinese export orders. New export orders fell at their fastest rate in three years.
The timing of a Chinese stimulus is not clear. Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong, said that policymakers are likely to wait until after the 18th Party Congress, scheduled for October, to take major action.
In Europe, the PMI of overall economic activity in the 17-country eurozone was at 46.6 points in August, only a tiny improvement from the previous month's 46.5 and still very low — a number below 50 means the economy is contracting.
Analysts said the number shows the eurozone is firmly in recession, which will continue to hurt its efforts to reduce debt and boost investor confidence. But investors seemed to cling to the hope that the numbers are bottoming out, raising the prospect of a mild recovery later this year.
Any improvement, however, is likely to depend on governments and central banks doing more to reform their economies and boost demand.
The European Central Bank is expected to present in coming weeks a plan to help indebted countries like Spain and Italy by buying their government bonds. It must first overcome resistance by Germany's central bank, however.
Solving Greece's financial problems will also be crucial. Prime Minister Antonis Samaras will travel to Berlin on Friday to meet with Chancellor Angela Merkel, and to France on Saturday for talks with President Francois Hollande. He is asking that Greece be given more time to meet its deficit targets and implement its reforms as its economy is struggling through a fifth year of recession.
But Germany's finance minister, Wolfgang Schaeuble, poured cold water on that idea, saying more time would not solve Greece's problems.
Earlier in Asia, Hong Kong's Hang Seng index led gains with a 1.2 percent rise, to 20,132.24, while mainland China's Shanghai Composite Index rose 0.3, to 2,113.07. South Korea's Kospi added 0.4 percent to 1,942.54. Australia's S&P/ASX 200 added 0.2 percent to 4383.70. Japan's Nikkei 225 index was up 0.5 percent, at 9,178.12.
In currencies, the prospect of the U.S. pumping more dollars into the economy pushed the greenback to its lowest level against the euro since early July. The euro rose to $1.2579 from $1.2530 late Wednesday in New York. The dollar was steady against the Japanese yen, at 78.47 yen.
Benchmark oil for October delivery rose 41 cents to $97.67 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 42 cents to finish Wednesday at $97.26 per barrel.
Erika Kinetz in Mumbai contributed to this report.