Wall Street stocks were subdued on Thursday after disappointing US home sales data followed better-than-expected jobs and manufacturing reports, adding to feelings of global economic uncertainty.
The broad S&P 500 fell 0.2 percent and the tech-heavy Nasdaq Composite lost 0.3 percent. In Europe, the regional Stoxx 600 rose 0.3 percent, while Hong Kong’s Hang Seng fell 0.8 percent.
The moves came after new data showed that home sales in the world’s largest economy recorded an annualized rate of 4.81 million units in July, down nearly 6 percent from the previous month and below consensus estimates of 4.89 million. Earlier in the session, unemployment data for the week ended August 13 painted a more optimistic picture with 250k US weekly jobless claims coming in 15k lower than expected.
Separately, a Philadelphia Federal Reserve survey of US manufacturing activity returned August at 6.2, well up from the previous month’s minus 12.3 and beating expectations for a minus 5 reading.
The details of the survey “were mixed and not particularly surprising on the web,” wrote analysts at JPMorgan, but “this report sent a much more optimistic signal about manufacturing conditions than the Empire State’s very pessimistic August survey.” [from the New York Fed] which was released earlier this week”.
Investors have been scrutinizing economic data releases over the past few weeks for clues as to how aggressively the Fed will raise borrowing costs to counter the rapid price growth.
In Treasury markets, the yield on the US two-year monetary policy Treasury note fell 0.07 percentage point to 3.23 percent, reflecting a rise in the price of the bond. The benchmark 10-year US yield fell 0.05 percentage point to 2.84 percent.
A day earlier, minutes from the last Fed meeting signaled that tight interest rates would be in place “for some time”. Details of the discussion indicated that central bank officials were in favor of raising interest rates to the point where they slowed economic growth, but not “enhancing hawkishness” as much as some traders expected, said Salman Ahmed, global head of the macroeconomic and strategic asset allocation at Fidelity.
“There is a significant disconnect between the markets and the Fed: the hard data [on inflation and jobs] don’t provide evidence of an irrefutable situation, allowing you to argue, question and push back,” Ahmed said.
While some investors spoke of “spike” inflation after the US CPI showed signs of stabilizing in July, “in reality things are often more complicated,” said Kasper Elmgreen, Amundi’s head of equities. “We’re getting very mixed data points, but the reality is that inflation remains well above levels that central banks are comfortable with.”
The US dollar — typically seen as a haven rising in line with expectations of higher interest rates — gained 0.5 percent against a basket of six other currencies, trading around its highest level since late July.
Beyond the Fed, central banks around the world have taken action to combat inflationary pressures in recent months. Norway raised interest rates by 0.5 percentage points to 1.75 percent on Thursday for the second time this year. Norges Bank signaled that it would hike rates further in September.