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Global stocks waver as traders assess upbeat China factory data

Global markets wavered on Tuesday as investors weighed upbeat data on China’s vast manufacturing sector.

European bourses hovered in a tight range leaving the continent-wide Stoxx 600 down 0.1 per cent. London’s FTSE 100 slipped 0.7 per cent, with Wall Street’s S&P 500 futures off by 0.4 per cent.

Investor sentiment was buoyed in Asia by a pick-up in activity at China’s factories, with the official manufacturing purchasing managers’ index beating economists’ predictions in June.

“The increase in PMI is consistent with a further expansion in industrial production in June in contrast with other countries in Asia,” said Mitul Kotecha, an emerging market strategist at TD Securities. “The PMI data will likely be supportive for risk assets in the near term, building on the momentum from overnight gains, with the region heading for a solid close to the quarter.”

Asia-Pacific markets were broadly higher on Tuesday. Japan’s benchmark Topix index rose 0.7 per cent as Australia’s S&P/ASX 200 gained 1.4 per cent. China’s CSI 300 index of Shanghai and Shenzhen-listed stocks was up 0.9 per cent while Hong Kong’s Hang Seng added 0.3 per cent.

Traders also cited an easing in the increase in US Covid-19 cases as a factor that bolstered market confidence, particularly on Wall Street, where the S&P 500 rallied 1.5 per on Monday, although investors were closely watching the reversal of economic reopening in several US states.

Willem Sels, chief market strategist at HSBC Private Banking, said the key question now is whether Covid-19 flare ups “become systemic enough to change the positive momentum in earnings revisions and economic growth, or will people take the view — as I think they currently do — that we have bottomed in terms of that.”

Oil prices slipped after rallying on Monday following positive economic data from China and Europe. Brent crude, the international benchmark, fell 0.9 per cent to $41.45 a barrel, while West Texas Intermediate, the US marker, dropped 0.8 per cent to $39.40 a barrel.

The dent to prices came as Royal Dutch Shell said it would cut up to $22bn from the value of its assets as it warned the pandemic would deal a lasting blow to demand for energy products and the global economy, sending its shares down around 2 per cent in London trading.

Warren Patterson, head of commodities strategy at ING, said US inventory numbers due out later on Tuesday were expected to show a decline of 750m barrels over the past week, while any hit to petrol demand from renewed restrictions in Texas and other states “will likely be reflected in next week’s release”.

Additional reporting from Philip Georgiadis and Anjli Raval

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