(Repeats to add GLOBAl MARKETS tag)
By John Geddie and Sujata Rao
LONDON, June 1 (Reuters) - Global equity markets started the
new month on the back foot on Wednesday, undermined by
lacklustre economic data and an oil price slide that took the
edge off energy and mining shares.
The pan-European FTSEurofirst 300 .FTEU3 and the STOXX
Europe 600 .STOXX both fell more than 1 percent, led by the
resources sector .SXPP , while U.S. equity futures pointed to a
weak opening for Wall Street.
The catalyst for the moves lower was Chinese manufacturing
data that showed the economy still struggling to regain
traction, while euro zone factory growth languished at a
three-month low
Oil slid more than 1 percent too, hurting resources stocks
and risk appetite in general. The MSCI world index
.MIWD00000PUS , which tracks shares in 45 countries, shed 0.2
percent, pulling away from a one-month high hit earlier this
week.
Markus Huber, a trader at the City of London Markets
brokerage, said equities were also seeing follow-through selling
after disappointing U.S. data on Tuesday.
"Furthermore, several (factory) data readings out of China
overnight painted only a mixed picture possibly indicating that
economic growth momentum is already in the process of slowing
again," Huber added.
Wall Street suffered a reversal late on Tuesday when soft
readings on consumer confidence and Midwest manufacturing
eclipsed strong retail sales indicators, and raised worries that
recovery was again stuttering in the world's biggest economy.
The risk off mood boosted safe-haven government bonds, with
Germany's 10-year yield falling to within 10 basis points of
record lows DE10YT=TWEB U.S. Treasury yields
slipped a touch after falling from multi-week highs late on
Tuesday US/ .
DOLLAR, DATA
The dollar floundered against the yen and the euro as the
data prompted investors to reconsider the most likely timing of
the Fed move - they now price a 22.5 percent probability of a
rate move in June, down from around 32 percent factored in a few
days back, according to the CME Group (NASDAQ:CME) FedWatch programme.
Much now depends on the upcoming manufacturing survey from
the Institute of Supply Management (ISM), with a weak reading
further eroding chances of a June rate hike. ECONUS The Fed
will also release its Beige Book report on business activity at
1800 GMT.
"We are looking at the ISM and what the Fed says in the
Beige Book today and if they deliver a surprise or a positive
outlook, I would expect markets to price in more than they
currently are in terms of a June rate hike," said Daniel Lenz, a
strategist at DZ Bank.
The dollar fell almost 0.4 percent against a basket of
currencies, pulling away from two-month highs set on Monday
.DXY , while against the yen it slipped around 1 percent,
pulling away from a one-month peak of 111.455 set on Monday
JPY= .
The Japanese currency was boosted by an announcement that a
planned sales tax hike would be delayed.
However, the Chinese yuan approached a five-year low against
the dollar CNY= after the central bank fixed the exchange rate
midpoint lower for the third straight day, adding to fears that
authorities saw the need for currency weakness to offset weaker
growth.
Politics is also an issue in many parts of the world,
weighing especially on sterling which hit a two-week low of
$1.4439 against the dollar GBP=D4 , adding to Tuesday's 1
percent losses.
The moves were driven by latest polls that showed the
percentage of voters supporting leaving the European Union may
be increasing ahead of the June 23 referendum GBP/ .
"With the referendum three weeks from tomorrow, the pound
could come under increasing downward pressure as the 'Leave'
camp regains momentum," James Reddiman, director at FX
consultancy Audere Solutions, said.