London: Investors pulled some profits from soaring European and Japanese shares on Thursday, although a run of relatively upbeat economic data and continued support from central banks kept equities near multi-year highs.
US stock futures also slipped, suggesting a subdued Wall Street open where this week’s rally has taken the Standard & Poor’s 500 Index and the Dow Jones industrial average to record peaks.
Strong Australian jobs data and a surprise interest rate cut by South Korea underpinned Asian shares on Thursday after Wall Street’s extended record run, but prices were capped by concerns that a pick-up in inflation in China will limit its policy options.
“Traders are growing ever more uneasy about this rally, where one has to ignore the fundamentals and put your blind faith in the central banks,” Jonathan Sudaria, a trader at Capital Spreads, said in a note to clients.
“Considering that 5 OECD central banks have cut rates in May alone so far, those who have bet against the rally have become martyrs to their belief that fundamentals still matter.”
European stock markets were seen narrowly mixed, with financial spreadbetters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX would open up as much as 0.2 percent and down as much as 0.2 per cent. The FTSEurofirst 300 index of top European shares finished at a five-year closing high the day before.
US stock futures were steady, suggesting a subdued Wall Street open after the Standard & Poor’s 500 Index and the Dow Jones industrial average ended at record peaks on Wednesday.
Japanese stocks, which earlier inched closer to striking distance of fresh five-year highs, gave up all early gains to ease 0.3 percent.
The Nikkei stock average earlier rose as much as 0.9 per cent to 14,409.82 points, just off Wednesday’s intra-session peak of 14,421.38, its highest since June 2008.
Europe’s broad FTSE Eurofirst 300 index slipped from a near five-year high to be down 0.2 percent. Germany’s DAX and Britain’s FTSE 100 were 0.1 percent lower.
Robust German factory activity and China’s stronger than expected trade performance have boosted investor sentiment this week with the mood enhanced by data showing strong UK industrial output in March and jobs growth in Australia and New Zealand.
But analysts have cautioned that the positive surprises in the recent numbers, including last week’s strong monthly US payrolls number, do not necessarily herald full scale recovery.
“We’ve seen a bit of stabilisation and positive surprises in the data recently, but we need to careful about reading to much into it,” said Morgan Stanley strategist Ian Stannard.
The MSCI world index, which tracks stocks in 45 countries, was down 0.15 per cent on Thursday but not far from the five-year highs hit this week, driven mainly by the loose monetary policies of the world’s big central banks.
Earlier MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1 per cent despite data showing China’s annual consumer inflation rising more than expected in April and its factory prices falling.
The euro gained for a third straight day against the dollar. Investors were encouraged by the upbeat German factory activity which has offset worries about a wider slowdown across the region in the second quarter.
The recent run of encouraging data extended to Spain and the Britain on Thursday which both reported some improvements in factory activity for March.
British industrial output rose a more-than-expected 1.1 per cent in March though it was down on the year, while in Spain the output decline slowed to its lowest rate in 19 months during March, although the manufacturing sector is still shrinking.
Any gains in the euro, however, from slightly more positive euro area data are expected to be limited by signs the European Central Bank could ease its monetary policy further to support the euro zone economy.
The euro was little changed $1.3150 with traders citing offers to sell as it approaches the $1.32 level.
“Investors have been focussing on the good German data and ignoring the soft patch elsewhere,” said Peter Kinsella, currency strategist at Commerzbank.
Meanwhile investors drove the Australian and New Zealand dollars up after the surprisingly strong jobs data lifted both currencies from lows struck after their central banks moved this week to tame their strength.