US stock futures edge up ahead of factory data

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U.S. stock futures ticked up Tuesday ahead of the release of manufacturing data that is likely to provide insight into the pace of the economic recovery.

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Futures tied to the S&P 500 rose 0.3%, pointing to gains for the stocks index after the opening bell. The gauge ended last month with a 7% advance for its best August since 1986. Contracts linked to the Nasdaq Composite rallied 0.9% on Tuesday, a day after the technology-heavy index reached an all-time high.

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The results of a private survey of purchasing managers in the U.S., due out at 10 a.m. ET, is likely to offer fresh insights into the recovery of the manufacturing sector in August. Similar data out from parts of Asia and Europe is showing continued, if somewhat patchy, signs of recovery in factory activity in yet another positive sign for the global economy.

“The continuation of this recovery is being priced in already,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. “As long as it keeps going, I think markets can continue advancing.”

A private gauge of China’s manufacturing activity for last month rose to its highest level in nearly a decade, supported by strong domestic and external demand and faster production activity. It marked the fourth consecutive month that the Caixin China purchasing managers index held above the 50 mark separating contraction from expansion. The Shanghai Composite Index ended the day up 0.4%.

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Manufacturing activity in Europe also showed some signs of improvement. Germany’s numbers came in below economists’ expectations, but still reflected an expansion. Data encompassing the eurozone region were in line with estimates. The pan-continental Stoxx Europe 600 edged up 0.2%.

Elsewhere in Asia, major stock benchmarks ended the day with a mixed picture. Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index were largely flat. South Korea’s Kospi index rose 1% after the government proposed an increase of 8.5% to its national budget for next year.

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The dollar continued to weaken amid expectations that U.S. interest rates will remain low for an extended period. The WSJ Dollar index, which measures the currency against a basket of others, dropped 0.4% to the lowest level since mid-2018.

In bond markets, the yield on 10-year Treasurys ticked up to 0.721%, from 0.695% on Monday.

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Gold rose 0.9% to $1,996.70 a troy ounce, the highest level in two weeks. Its gains were partly due to the weaker dollar as the precious metal is priced in the greenback, according to Stephane Monier, chief investment officer at Lombard Odier. The dollar’s rally also reflects concerns among some investors that inflation may spike, eroding the value of bond investments.

“The price of gold is also to a large extent a sign of confidence of investors into the financial systems,” he said. “Some people are worried that central banks are printing a lot of money and want a refuge.”

Lombard Odier, a Swiss private banking group, has added gold to its strategic asset allocation over the summer. The metal currently makes up 3% of holdings across client portfolios, Mr. Monier said.

Copper for delivery in three months rose 2% on the back of China’s manufacturing report. Traders are expecting a rise in demand for the industrial metal going forward, according to Deutsche Bank analysts.

Write to Anna Hirtenstein at [email protected]

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