Global stock markets mixed as industrial production up

Global stocks wavered Wednesday on strong industrial production data from the US and eurozone, while concerns about the Chinese economy and a further Fed rate hike persisted.

Wall Street stocks were mostly higher early Wednesday after the Federal Reserve announced industrial production rose by 1.0 per cent in July, after two straight months of decline, lifted by a 5.2 per cent rise in the production of motor vehicles and parts.

“The industrial data comes a day after retail sales also overshot expectations,” according to Fawad Razaqzada, market analyst for City Index and FOREX.com, adding it gave major US stock averages “a bit of a bounce”.

The eurozone’s industrial production data was also “surprisingly strong”, with 0.5 per cent growth month-on-month in June, Razaqzada said.

“Good data is not necessarily good news for stocks,” he warned, adding that for the US “it increases the likelihood” the Fed would continue its rate hike policy.

Awaiting hints about the Fed rate policy, European markets closed mixed with Paris down 0.10 per cent, London down 0.44 per cent but Frankfurt up 0.14 per cent.

The British pound strengthened on the release of inflation data showing it had dipped to a 15-month low. Still, the UK still has the highest rate of inflation among G7 nations, and the drop might not be enough to prevent another rate hike next month.

“The result will likely elicit only a slight sense of relief in the government and at the Bank of England,” said Richard Flax, Moneyfarm chief investment officer.

The focus for the remainder of Wednesday will be the release of minutes from the US Federal Reserve’s July policy meeting, which investors will be scouring for insight on the bank’s interest rate outlook.

Comments by Minneapolis Fed president Neel Kashkari on Tuesday also added to concerns that the US central bank is not yet done with rate hikes in its battle to tame inflation.

While inflation may be moving in the right direction, it is still higher than the Federal Reserve would like and it is too early to declare victory, said Kashkari, a member of the Fed’s interest-rate-setting committee.

- Banks cut China forecasts - Asian markets were well in the red, with Tokyo, Hong Kong, Seoul and Sydney all closing down more than 1.0 per cent. “Most Asian stocks experienced declines due to further deteriorating economic conditions in China,” said Stephen Innes of SPI Asset Management.

“These concerns were exacerbated by resurfacing anxieties about a more aggressive stance from the US Federal Reserve, causing a wholesale lack of interest in high-risk assets.” Figures released Wednesday by China’s National Bureau of Statistics showed new home prices declined for a second month in July in a further indication of the problems facing the deeply indebted property sector and the wider economy.