Stocks on Wall Street were mixed and the dollar jumped on Thursday as investors favoured safer assets following gloomy data from China and ahead of US jobs numbers.
The Nasdaq Composite and S&P 500 had spent much of the day down as fresh lockdowns in China in response to Covid-19, and weak manufacturing data from the country, stoked investor worries that the global economy is faltering.
But those positions had largely reversed by the end of trading on Thursday as investors waited for US employment data on Friday which is expected to factor heavily in the Federal Reserve’s decision making about the size of its interest rate increase at its September meeting.
The Nasdaq Composite, with a high concentration of US tech stocks, ended the day down 0.3 per cent, after earlier falling to its lowest level in a month.
“The move in the Nasdaq is a continuation of what we’ve seen in the last month. High multiple growth stocks are the easiest place to take off risk,” said Mark Stoeckle, chief executive and a portfolio manager at Adams Funds.
Traders darted into the dollar, seen as a shelter during times of market tumult, sending an index of the US currency against half a dozen peers rallying nearly 1 per cent to a new 20-year high. Other currencies slumped against the dollar, with the pound falling 0.7 per cent to $1.154, the euro down 1.1 per cent to $0.994, and Japan’s yen weakening 0.9 per cent to touch ¥140 for the first time since 1998.
Wall Street’s blue-chip S&P 500 rose 0.3 per cent, reversing a day in the red in the last minutes of the trading day. In Europe, the Stoxx 600 index ended Thursday 1.8 per cent lower.
Semiconductor stocks fell after US officials told chipmaker Nvidia to stop selling two chips designed for artificial intelligence work to Chinese companies. Nvidia fell 7.7 per cent, while other semiconductor groups also tumbled. Advanced Micro Devices dropped 3 per cent, while Semtech fell 27 per cent.
Concerns over global growth flared up after Chinese authorities on Thursday moved to lock down the city of Chengdu, as officials stick to the country’s zero-Covid policy.
China’s Caixin manufacturing purchasing managers’ index also came in worse than expected, registering a reading of 49.5 for August, down from 50.4 in July and below expectations of 50.2. Any figure below 50 signals a contraction.
Grace Ng, a JPMorgan economist, said the report raised “concerns of slowing external demand” for products produced in the country’s vast factory sector.
Oil, which is highly sensitive to expectations for global growth, extended a recent fall. Brent, the international benchmark, fell 3.4 per cent to $92.36 a barrel.
Strong labour market data from the US on Thursday also intensified concerns that the Federal Reserve will continue rapidly raising interest rates in the coming months.
First-time claims for unemployment benefits clocked in at 232,000 for the week ending August 27, according to data from the labour department, significantly lower than estimates of 248,000.
“While still not entirely conclusive due to potential seasonal adjustment difficulties, the recent stabilisation . . . in first-time jobless claims appear to be signalling that the labour market remains vibrant,” said economists at research company Maria Fiorini Ramirez.
The yield on the two-year note, which closely tracks interest rate expectations, hit a fresh 15-year high earlier in the day. By the end of the day it had pared some of that move and was trading 0.02 percentage points higher at 3.51 per cent.