UKX FTSE 100 Index

By Max Bernhard 

-- European stocks lower

-- Dollar flat against euro

-- Crude oil prices higher

Global stocks edged lower Tuesday, as manufacturing sentiment in Europe fell to the lowest level in nearly seven years.

The Stoxx Europe 600 was down 0.3%, with Germany's DAX 0.1% lower and the U.K.'s FTSE 100 down 0.1%.

Adding to the subdued outlook, the eurozone's annual rate of inflation fell to 0.9% in September, its lowest level in almost three years, data published Tuesday showed.

Futures on the S&P 500 inched up 0.2%, ahead of a key indicator for U.S. factory activity, the Institute for Supply Management's manufacturing index, which fell for the first time in three years in August.

The ICE U.S. Dollar index, a measure of the dollar's level against a basket of currencies, rose 0.1% to 99.58, its strongest level since 2017. The euro was flat against the dollar after paring earlier losses which had taken it near its weakest point since May 2017.

The latest eurozone manufacturing purchasing managers index data dropped to 45.6 in September, its lowest level since 2012. The data for September from Spain, Italy and Germany were all below 50, indicating contraction.

The German PMI reading was weakest, hitting its lowest level since the 2009 financial crisis.

The reading confirmed that "the eurozone's growth engine is sputtering," said London Capital Group analyst Ipek Ozkardeskaya.

Such economic shakiness means the European Central Bank "will need to add more oil to the engine," and it will fuel expectations of a more accommodative central-bank policy and increased downside pressure on the euro, she added.

Weakness in the euro is a reflection of slower economic growth in Europe compared with the U.S., combined with a sense among investors that the ECB will have to be more aggressive than the Federal Reserve to counteract a slowdown.

"Germany's overreliance on manufacturing has bode well through eurozone expansion," but with the U.K.'s looming exit from the EU and global trade tensions it makes sense the country is hit hardest, said IG senior market analyst Joshua Mahony.

"This morning's inflation and manufacturing data does little to change my bearishness on the euro," he added.

Among individual stocks, U.K. cafe chain Greggs led the Stoxx Europe 600 lower, down 10%. The company, known for its pastry-wrapped sausage rolls, reiterated a warning that it is preparing for the U.K.'s departure from the European Union and that there are pressures on labor and food costs.

Government bond yields were mostly higher Tuesday, with the yield on U.S. 10-year Treasurys rising to 1.732%, from 1.667% Monday. Bond yields and prices move in opposite directions.

Earlier in the day, Australia's benchmark index rose 0.8% after the Australian central bank cut interest rates by a quarter of a percentage point to a record low 0.75% and left the door open to more cuts. The country's economy has been buffeted by the economic slowdown in China, a key customer for Australian raw materials.

In Japan, the Nikkei climbed 0.6%, despite data showing sentiment among Japanese large manufacturers falling to its weakest level in over six years. Strong domestic demand and growing investment activity likely limited the decline, Société Générale Chief Japan Economist Takuji Aida said.

Investors were trying to gauge how Japan's increase in local sales tax, which came into effect Tuesday, would affect consumer spending.

Hong Kong and mainland Chinese stock markets were closed for a holiday.

In commodities, oil futures for Brent crude rose 0.8%.

On Monday, stocks in the U.S. finished the third quarter higher, with the S&P 500 turning in its best performance in the first nine months of a year since 1997.

Write to Max Bernhard at Max.Bernhard@dowjones.com

(END) Dow Jones Newswires

October 01, 2019 08:53 ET (12:53 GMT)

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