By Riva Gold
Global stocks mostly started the month higher, supported by upbeat data on the Chinese economy and a rise in commodity prices.
Futures pointed to a 0.2% opening gain for the S&P 500, following a strong session in Asia, while the Stoxx Europe 600 swung in and out of positive territory and was last down 0.3%.
Shares got a lift after data Tuesday showed China's industrial sector picked up last month, with an official gauge of factory activity rising to its highest level in two years. Concerns about the Chinese economy had spooked markets at the start of the year,but investors said recent data has been more encouraging for global growth.
"China is doing a bit better than many people expected," said Ugo Montrucchio, a multiasset fund manager at Schroders. While it is hard to draw sharp conclusions from the country's macroeconomic data, it is clear the country's ongoing fiscal stimulus is bringing about some signs of stabilization, he added.
Commodity prices also moved higher, as metal prices rose in the wake of the Chinese economic data and Brent crude oil climbed 0.8% from its lowest level since September to $49.01 a barrel. Gold added 1.2% to $1,287 an ounce.
In recent sessions, investors have also been grappling with a series of upcoming events this month, including the U.S. election, the rest of the third-quarter earnings season and meetings of the Federal Reserve and Bank of England later this week.
Both implied and realized volatility have been low, and hedging for big swings in the market has been limited, suggesting investors have taken on very light positions for now, according to Ilya Feygin, strategist at brokerage WallachBeth Capital.
"People are sitting on their hands, waiting for a bit of a clearer horizon on what 2017 will look like, said Alex Dryden, global market strategist at J.P. Morgan Asset Management.
On Tuesday, downbeat earnings reports weighed on European bourses, even as the mining sector advanced. Shares of Standard Chartered fell 4.8% after the Asia-focused bank posted a $458 million pretax profit that fell short of analyst expectations, while shares of BP fell 1.7% after the British energy giant posted third-quarter profits.
Shares of Shire declined 4.2%, dragging down the health-care sector, after the company cuts its earnings guidance.
"The European economy is making great progress, but nobody told the equity market about that," Mr. Dryden said. With the local markettilted toward the energy and financial sectors, it hasn't benefited from the recent pickup in growth, he said.
In U.S. premarket trading, shares of Pfizer fell 1.6% after the drug company lowered its earnings outlook for the year, while Archer Daniels Midland rose 3.9% after its profit topped expectations.
Earlier, Asian markets were buoyed by the better-than-expected reading on the Chinese economy. Shares in Hong Kong led gains as the Hang Seng rose 0.9%, while stocks in Shanghai advanced 0.7%. Purchasing Managers' Indexes from Nikkei and IHS Markit also pointed to improvements in Japan, South Korea and Taiwan.
Japan's Nikkei Stock Average inched up 0.1%, while the dollar was flat against the yen at Yen104.9010 after the Bank of Japan left its stimulus program unchanged as expected but reduced its inflation forecasts.
Shares in Australia edged lower, however, while the Australian dollar rose sharply after the Reserve Bank of Australia kept its cash rate target unchanged at 1.5%.
In bond markets, the yield on 10-year German debt rose to as high 0.203%, close to its highest since May, before retreating to 0.179%, while U.S. Treasury yields climbed to 1.856% from 1.834% on Monday. Yields move inversely to prices.
"I think higher yields are a mixed blessing for the stock market," said Peter Tuz, president at Chase Investment Counsel. "Clearly if higher yields suggest stronger economic growth and higher earnings growth, that's not necessarily bad...as long as yields are not so high that bonds become much of an alternative for equities," he said.
In currency markets, the WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, fell 0.2%, just one day before the Federal Reserve's November meeting. The bank is widely expected to keep interest rates unchanged but leave the door open to a rise in December.
The euro rose 0.4%against the dollar to $1.1017, while the British pound fell 0.2% against the dollar to $1.2217. Bank of England Gov. Mark Carney said in a letter Monday that he plans to serve an extra year in his post, ahead of a meeting by the central bank on Thursday.
Write to Riva Gold at firstname.lastname@example.org
(END) Dow Jones Newswires
November 01, 2016 09:08 ET (13:08 GMT)
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