European stocks edged higher on Thursday after markets kicked off the new month on a depressed note, as new economic data intensified questions about rising interest rates and global growth prospects.
The regional Stoxx Europe 600 stock gauge rose 0.4% in early trades, after falling 1% in the previous session. The German Dax also added 0.4%. UK markets were closed for a public holiday.
The moves came as Hong Kong’s Hang Seng lost 1% and the Chinese mainland’s CSI 300 traded flat as investors balanced both the easing of coronavirus restrictions at Shanghai and concerns about the health of businesses in the region. Figures released the day before showed that Chinese manufacturing activity had contracted for the third month in a row.
Meanwhile, JPMorgan Chase Chief Executive Jamie Dimon said on Wednesday that investors should prepare for an economic “hurricane”, warning that the war in Ukraine would continue to pressure commodity markets.
Dimon also warned of increased market volatility as the Federal Reserve begins to shrink the size of its balance sheet by allowing bonds it holds to mature without buying new ones to replace them.
Futures following Wall Street’s S&P 500 added 0.2% in early European trading, after the broad gauge closed the previous session down 0.7%.
Government bond markets were also more stable on Thursday after being hit by a fresh wave of selling a day earlier. The pressure followed stronger-than-expected results from a closely watched U.S. manufacturing survey, signaling that the Fed may have more room to raise borrowing costs without triggering a recession.
The yield on the benchmark 10-year US Treasury remained stable at 2.94%. The German Bund’s equivalent yield added 0.02 percentage point to 1.19%. Bond yields rise as their prices fall.
Meanwhile, Brent crude fell 1.6% to $114 a barrel, after breaching $120 earlier in the week as soaring fuel prices heightened supply fears. Thursday’s drop followed news that Saudi Arabia had signaled to its Western allies that it was ready to increase oil production, should Russia’s output drop significantly due to sanctions.
“We expect Brent prices to remain strong over our forecast horizon,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management. “We expect Brent crude to trade at $115 a barrel through June 2023, above levels currently quoted in futures markets.”
In currencies, the dollar index – which measures the greenback against a basket of six others – slipped 0.2%, with the euro rising 0.3% to just under $1.07.