LONDON (AP) -- Stocks advanced Tuesday but the rebound was far from convincing as investor sentiment continues to swing according to the flow of U.S. economic data.
For the past few weeks, market directions have largely depended on the vagaries of the U.S. economic data and their implications for the future of the Federal Reserve's monetary stimulus program. With little economic news Tuesday, the prevailing mood in markets was far less volatile than of late.
"Markets seem to be dominated by flow and positioning ahead of the next batch of event risk tomorrow," said Adam Cole, an analyst at RBC Capital Markets.
In Europe, the FTSE 100 index of leading British shares ended Tuesday up 0.7 percent at 6,568 while Germany's DAX rose 0.12 percent to 8,295. The CAC-40 in France was 0.13 percent higher at 3,925.
In the U.S., the Dow Jones industrial average initially pushed on from Monday's strong close before dropping later on in trading — the Dow Jones industrial average was off 0.2 percent at 15,219 while the broader S&P 500 index was down the same rate to 1,636.
Monday's trading showcased the recent trend in markets, with a disappointing manufacturing survey from the Institute for Supply Management causing stocks to rise. Investors concluded that there was less chance of the Fed reducing the amount of financial assets it buys as part of a strategy to shore up the U.S. economic recovery. The stimulus has been one of the main reasons why many stock indexes have hit record highs, so investors have been viewing a possible withdrawal with concern.
Though Monday's ISM survey, which indicated that the manufacturing sector was contracting again, reined in expectations of a Fed policy change, there's a lot of economic data this week that could alter predictions again.
Tuesday is probably the lightest data day of the week, but the pace picks up on Wednesday with the ADP private payrolls report for May and the ISM's survey of activity in the services sector. Most important will be Friday's nonfarm payrolls report for May. The payrolls figures are usually the U.S. economic release with the greatest market impact.
"The sizeable market reaction to yesterday's soft U.S. data highlights the potential significance of the payrolls report on Friday," said Nick Bennenbroek, an analyst at Wells Fargo Bank.
It's also a big week in Europe, with the European Central Bank meeting to discuss the ailing eurozone economy and whether anything more needs to be done to get it growing again. The latest speculation in the markets is that the ECB will refrain from announcing any big new measures Thursday.
Ahead of the raft of economic news about to emerge, most currencies were stable. The euro was steady around the $1.3070 mark, while the dollar recouped some of the previous days' retreat against the yen, trading 0.6 percent higher at 100.22 yen.
The Australian dollar was in focus after the country's central bank opted against cutting interest rates again but hinted at further easing and voiced concern over the currency's strength. The Aussie dollar was down 1.3 percent at $0.9627, helping the country's main stock index post a modest 0.3 percent advance.
Elsewhere in Asia, Japan's Nikkei 225 index clawed back some of its prior session losses with a 2.1 percent gain to close at 13,533.76. Mainland Chinese shares fell for a fourth straight day, with the Shanghai Composite Index falling 1.2 percent to 2,272.42, its biggest loss in more than a month. Hong Kong's Hang Seng was nearly unchanged at 22,285.52.
Oil prices drifted slightly higher, with the benchmark New York rate up 36 cents at $93.80 a barrel.
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- RBC Capital Markets