Downbeat activity data pushes global shares lower
By Francesco Canepa and Nigel Stephenson LONDON (Reuters) - Shares fell and safe-haven currencies rose on Thursday after downbeat surveys of economic activity in China and parts of Europe highlighted the fragility of the global recovery and raised concerns about the withdrawal of monetary stimulus. A contraction in Chinese manufacturing set the gloomy tone that was reinforced by data showing an unexpected stall in activity across the euro zone. "The macro data is starting to be not as good as before and some red lights are appearing in our model," Johann Nouveau, partner at Seven Capital Management, a hedge fund which uses mathematical models that gauge economic data and market momentum. "We're still long stock markets but we're decreasing our exposure as the probability of a sharp drop is increasing." Escalating conflict in the Ukrainian capital, Kiev, hampered developing country stocks and MSCI's emerging market index <.MSCIEF> fell 0.8 percent. Its world equity index <.MIWD00000PUS>, which tracks shares in 45 countries, was down 0.5 percent at a six-day low, having hit its highest in almost a month on Wednesday. In Europe, the benchmark FTSEurofirst 300 index <.FTEU3> lost 0.5 percent, with mixed PMI data from Germany, the euro zone's powerhouse, barely lifting the mood. Markit's Composite Purchasing Managers' Index for the euro zone dipped in February, although it held just below January's 31-month high. The service sector in France shrank at its fastest pace in nine months. "The outcome was much weaker than expected and it clearly shows how business sentiment is failing to gain momentum as headwinds to growth are still well alive," Annalisa Piazza, market economist at Newedge Strategy, said of the French data. Earlier, Asian stocks tumbled after the preliminary China Purchasing Managers' Index from HSBC/Markit for February came in at a seven-month low, falling deeper into contraction territory. "You have to expect Beijing to act if the economy slows down more from here, because they cannot proceed with their reform agenda without maintaining a certain level of growth," said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities. The data from the world's second largest oil consumer dragged Brent crude below $110 a barrel. SAFE HAVENS & STIMULUS The Swiss franc, which is backed by Switzerland's solid economic fundamentals and tends to do well at time of market jitters, rose 0.3 percent against the U.S. dollar, and the yen - another safe-haven currency - also gained. The greenback, however, was still firm against other major currencies after the U.S. Federal Reserve's latest policy meeting showed the central bank would keep trimming its asset-purchase program. Three Fed officials said on Wednesday said they believed the U.S. economy was gaining traction despite a recent slowdown caused by bad weather, allowing the central bank to stick to its plan to wind down bond-buying this year. The dollar index <.DXY>, which measures the greenback against a basket of currencies, was 0.2 percent higher at 80.33. Yields on low-risk German government bonds fell while spot gold ticked up to $1,313.50 an ounce. (Additional reporting by Patrick Graham and Marius Zaharia in London and by Lisa Twaronite in Tokyo; Editing by John Stonestreet)
