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Wall Street stocks pause after best month since 2020

US stocks zigzagged after posting their best month since 2020, as signs of an economic slowdown and easing inflation dampened expectations of how much the Federal Reserve would raise interest rates.

The broader S&P 500 was little changed on Monday after rising 9.1% during July. The tech-heavy Nasdaq Composite added 0.1%, after rising 12.3% last month, its biggest gain since April 2020.

Trading cycles in the stock markets are usually lower during the summer vacation period.

Monday’s moves came as a survey of US manufacturers suggested that cost pressures on companies in the world’s largest economy may be easing. The Institute for Supply Management’s price index gave a reading of 60 for July, well below expectations of 75 and down from 78.5 in June.

The same report showed that activity growth in the US factory sector slowed slightly in July. The ISM Manufacturing Purchasing Managers’ Index delivered a reading of 52.8, down from 53 the previous month and better than economists’ expectations of 52. Any figure above 50 indicates expansion.

The disappointing Chinese factory data at the end of the week has already confused the economic outlook. Official data showed that factory activity in the country unexpectedly shrank last month, after new outbreaks of the coronavirus and pressure in the country’s real estate market weakened demand. The PMI for the manufacturing sector read 49, down from 50.2 in June.

“Both domestic demand and external demand for manufacturing have been weak,” Iris Fang, China economist at ING, said in a note to clients.

“Uncompleted real estate projects could be at least part of the reason,” Feng added, after debt-ridden developers Construction of millions of apartments was frozen. Fang also noted “risk of contagion from financially unsound property developers to their downstream and upstream industries.”

Official PMI line chart shows China's factory sector sliding back into contraction territory

Europe’s Stoxx 600 regional stock index traded unchanged on Monday. A benchmark of European banking shares rose 1.4%, helped by lender HSBC’s quarterly earnings that beat analysts’ forecasts.

Brent crude, the oil benchmark, fell 3.8% to $100 a barrel.

In recent weeks, investors have scaled back their expectations of how much the Fed will tighten monetary policy to rein in runaway inflation. Futures markets on Monday priced a benchmark interest rate of about 3.3% for February 2023, down from expectations of 3.9% in mid-June. The US central bank’s current target range is 2.25 to 2.5 percent, after that Raised credit costs by 0.75 percentage points for the second time in as many months last week.

Markets are “looking beyond the known inflation issue and what they see as a slowdown that will force central banks to ease again,” said Antonio Quarrero, chief investment officer at Generali Insurance Asset Management.

In the government debt markets, the yield on the 10-year Treasury note was steady at 2.64 percent. This follows a strong rise in government debt last week, after data showed the US economy was doing so decreased for the second quarter in a row.

Elsewhere, Italian government bonds rose after weeks of intense pressure. The yield on Rome’s 10-year debt fell 0.14 percentage points, falling below 3% for the first time since May.

Wall Street stocks pause after best month since 2020 Source link Wall Street stocks pause after best month since 2020

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