World shares, the euro and oil prices fell on Wednesday as weak data highlighted the headwinds facing the global economy, though hopes of more monetary stimulus from central banks limited the falls.
Strong demand for safe-haven German debt at a bond auction also signaled that investors remain worried over the implementation of recently agreed measures to help ease the euro zone’s debt crisis, sending yields on Spanish and Italian debt higher.
Activity was subdued, however, with US markets closed for the Independence Day holiday and ahead of policy decisions from the European Central Bank and Bank of England on Thursday.
In the quiet market Germany found it easy to sell 3.3 billion euros ($4.2 billion) of 5-year government bonds, receiving bids for 2.7 times the amount on offer at an average yield of just 0.52 per cent.
“What we are seeing is that ... this demand for safety remains intact,” said Michael Leister, rate strategist at DZ Bank.
After the auction 10-year Spanish bond yields rose 11 basis points to 6.38 per cent, and the Italian equivalent rose 12 basis points to 5.76 per cent.
The euro shed 0.2 per cent against the dollar to hit $1.2565, but was still holding above on Tuesday’s low of $1.2559.
Traders said the euro was under pressure from widespread expectations that the ECB is about to cut interest rates.
The single currency fell to an 11-1/2 year low against the higher-yielding Swedish crown when Sweden’s central bank kept its key interest rates unchanged.
European share markets ended three days of gains, with the FTSEurofirst 300 index .FTEU3 of top European shares falling 0.3 per cent to 1,042.94 points, retreating from a two-month high set on Tuesday.
European equity markets began their latest rally on Friday, having fallen sharply for much of June, after European Union leaders agreed on new measures to support the region’s banks and address funding problems facing Spain at a summit meeting.
Investors have also been encouraged back into riskier asset markets by the belief that the ECB will cut rates on Thursday and that it may also inject fresh funds to help boost the region’s struggling economy.