Markets ignore best European factory data in 17 years

(Reuters) European shares traded lower on Friday despite strong eurozone factory data, after a delay to a keenly awaited US tax reform bill dented Asian trading and curbed appetite for the dollar.

Eurozone shares, which started to accelerate losses about half an hour before the release of the data, briefly touched a session low before stabilising down about 0.9%.

PMIs

A purchasing managers’ index showed that eurozone factories had their busiest month for over 17 years in November, even though they raised prices at the fastest rate in more than six years.

Forward-looking indicators suggested the momentum would continue to the end of 2017, capping what is expected to be the best year for euro zone economic growth in a decade.

“We have a two-faced market. Wall Street continues to run on hopes of fiscal reform while in Europe, the renewed strength of the euro is hurting the DAX which in turn is dragging all the other bourses to the downside,” said Carlo Alberto De Casa, Chief Market Analyst at ActivTrades.

Chart courtesy of IHS Markit

The single currency eased slightly from the day’s highs of $1.1940 to trade at $1.1920. It was still up 0.2% on the day.

The gap between German 10-year and 30-year borrowing costs was at its tightest level since late August as a worse-than-expected eurozone inflation number on Thursday pushed back prospects for monetary policy tightening well into the future.

US tax reform delays

In the United States, the Senate postponed voting on the tax bill late on Thursday as legislators wrestled with problems on an amendment and then adjourned, leaving it unclear whether a decisive vote on the bill would occur on Friday.

“The market’s main focus is now whether the tax bill will pass or not,” said Yutaka Miura, a senior technical analyst at Mizuho Securities in Tokyo.

The MSCI World Index, which tracks stocks from developed economies, slid 0.2%. Japan’s Nikkei had finished 0.4% higher, while MSCI’s broadest index of Asia-Pacific shares outside Japan was nearly flat on the day.

OPEC

The dollar index against a basket of six major currencies was 0.1% lower at 92.95 but poised to eke out some gains for the week, supported by oil prices, after OPEC and other major producers agreed to extend production curbs.

US crude futures were up 28 cents, or 0.5%, at $57.67 a barrel. Brent crude futures added 37 cents or 0.6% to $63.01 a barrel. Brent rose for a third consecutive month in November.

“This outcome was widely expected, but its confirmation has removed a clear near-term downside risk to prices,” said Gordon Gray, head of oil and gas equity research at HSBC.