LONDON — An unexpected rise in U.S. consumer confidence in August helped stocks in Europe and the U.S. recoup earlier losses Tuesday as markets remain on edge ahead of more data from the world's largest economy.
In Europe, the FTSE 100 index of leading British shares was up 8.36 points, or 0.2 percent, higher at 5,209.92 while Germany's DAX was 8.46 points, or 0.1 percent, lower at 5,903.95. The CAC-40 in France traded down 5.16 points, or 0.2 percent, to 3,481.85.
In the U.S., the Dow Jones industrial average was up 34.96 points, or 0.4 percent, at 10,044.69 an hour into the session, while the broader Standard & Poor's 500 index rose 2.41 points, or 0.2 percent, at 1,051.33.
European and U.S. stocks had been trading far lower before a buoyant U.S. consumer confidence survey helped lift optimism.
The Conference Board said its headline index spiked to 53.5 in August from a revised 51.0 in July. The increase was unexpected — the consensus in the markets was for the index to decline modestly to 50.5.
Investors are not getting too carried away though, given that there's so much more news to come this week.
Alan Ruskin, a currency strategist at Deutsche Bank, also noted that the expectations component of the confidence number led the rise in the headline number, but that expectations have a "very poor relationship with either present or future consumer spending" — retail sales will be key to whether the recovery picks up steam again.
With U.S. economic data underperforming over the last couple of months, investors will be focusing in on a raft of statistics releases over the rest of the week, culminating in Friday's jobs report for August.
"Equity markets remain nervous in front of the U.S. jobs report on Friday where there is a risk of an increase in the unemployment rate," said Neil MacKinnon, global macro strategist at VTB Capital.
The payroll data often set the market tone for a week or two, and anything particularly weak could affect whether the Fed decides to introduce additional stimulus measures. At the moment, market consensus is that around 90,000 U.S. jobs were lost in August, but that 26,000 were added, if government census jobs that ended are taken out of the equation. Meanwhile, the unemployment rate is expected to hold steady at 9.5 percent or even rise to 9.6 percent.
This week's U.S. economic newsflow, which also includes the monthly manufacturing and services surveys from the Institute of Supply Management, will likely go a long way toward determining whether the U.S. Federal Reserve enacts further stimulus measures. Last week, Fed chairman Ben Bernanke said another round of monetary easing may be in the offing if the U.S. economy continues to weaken.
All eyes later will be on the minutes to the last rate-setting meeting of the Fed and how split the rate-setting panel is about the prospect of further monetary easing.
The Bank of Japan announced Monday that it is enacting another round of monetary easing but the worry is that it is doing too little too late to prevent a fall back into recession.
As well as worrying about the slowdown in the U.S., Japanese investors are clearly concerned that the continued rise in the value of the yen and falling prices will push the world's third-largest economy back into recession.
Those concerns clearly weighed on Japanese stocks — the Nikkei 225 stock index tumbled 325.20 points, or 3.6 percent, to close at 8,824.06.
Investor nervousness about the U.S. economy is particularly evident in the performance of the Japanese yen and the Swiss franc — the two currencies are considered to be safe havens for investors looking for low-risk destinations for their cash and have rebounded hugely over the last few weeks despite concerns about the Japanese and Swiss economies.
The rise in the yen — last week it rose to a 15-year high against the yen — is undeniably a cause for concern for Japan's high-value exporters as well as policymakers.
Investors had been hoping for direct action to contain the yen's rise and revive a faltering Japanese economy — the failure to act has kept the yen in demand and by mid afternoon London time, the dollar was 0.2 percent lower at 84.46 yen.
Elsewhere in Asia, Hong Kong's Hang Seng index retreated 1 percent to 20,536.49, South Korea's Kospi dropped 1 percent to 1,742.75, and Australia's S&P/ASX 200 fell 1.1 percent to 4,404.20.
Benchmarks in mainland China, Singapore, Taiwan and New Zealand also retreated.
The rebound in stocks Tuesday helped oil prices clamber off earlier lows. Benchmark crude for October delivery was down 35 cents at $74,35 a barrel in electronic trading on the New York Mercantile Exchange.