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Profit-taking hits US stocks, recession hobbles Europe

·3-min read
Growth in China's manufacturing activity slowed last month, with officials pointing to a global shortage of shipping containers, among other problems

US markets were hit by a bout of profit-taking on Friday, while in Europe data confirming the eurozone is back in recession dampened investor enthusiasm.

Weaker-than-expected Chinese economic data also hit sentiment, with Asia's main equity indices closing out the week lower.

Wall Street had powered to fresh highs on Thursday following news that US growth accelerated more than six percent in the first quarter and jobless claims continued to fall to new pandemic-era lows.

US indices have also been benefitting from outsized earnings reported this week by tech heavyweights Apple, Facebook and Google.

But investors are starting to worry that the rally has run out of steam, leaving stocks vulnerable to profit-taking.

Friday's lackluster session may suggest that "a lot of the good news is already priced in," said Shawn Cruz of TD Ameritrade, adding warnings from companies of higher supply chain costs are "a real big risk to the outlook for the rest of the year."

The broad-based S&P 500 ended down 0.7 percent, retreating from Thursday's record but eking out a gain for the week. Both the Dow and Nasdaq finished modestly lower for the week.

- Germany drags -

European stocks ended the day mostly lower following data showing that the eurozone economy fell into its second recession in less than a year in the first quarter, as slow vaccinations and pandemic lockdowns stopped a rebound.

Germany was the major drag on growth in the January to March period, with exports unable to overcome a steep drop in demand by confined consumers, analysts said.

"The economic recovery was always likely to be uneven in nature, and this morning's growth figures highlighted exactly that," said IG analyst Josh Mahony, noting that Covid restrictions pushed Germany into a contraction while France grew modestly.

"However, the story of a lagging EU could soon start to shift, with the region expecting to ramp up their vaccinations to fully cover 70 percent of the population by mid-July," he added.

Adding to the selling pressure was a report showing slowing growth in China's factory activity, owing to a global shortage of shipping containers, supply chain problems and rising freight rates.

Observers nevertheless remain upbeat about the outlook, as vast sums of government and central bank cash swirl around the world economy.

"All evidence still points to continued support from both fiscal and monetary policy against a backdrop of accelerating corporate earnings," Mark Haefele of UBS Global Wealth Management said.

"This reinforces our view that markets can advance further, with cyclical parts of the market -- such as financials, energy, and value stocks -- likely to benefit most from the global upswing."

- Key figures around 2050 GMT -

New York - Dow: DOWN 0.5 percent at 33,874.85 (close)

New York - S&P 500: DOWN 0.7 percent at 4,181.17 (close)

New York - Nasdaq: DOWN 0.9 percent at 13,962.68 (close)

London - FTSE 100: UP 0.1 percent at 6,969.81 (close)

Frankfurt - DAX 30: DOWN 0.1 percent at 15,135.91 (close)

Paris - CAC 40: DOWN 0.5 percent at 6,269.48 (close)

EURO STOXX 50: DOWN 0.6 percent at 3,974.74 (close)

Tokyo - Nikkei 225: DOWN 0.8 percent at 28,812.63 (close)

Hong Kong - Hang Seng Index: DOWN 2.0 percent at 28,724.88 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,446.86 (close)

Euro/dollar: DOWN at $1.2021 from $1.2121 at 2100 GMT

Pound/dollar: DOWN at $1.3814 from $1.3944

Euro/pound: UP at 87.02 pence from 86.93 pence

Dollar/yen: UP at 109.33 yen from 108.93 yen

Brent North Sea crude: DOWN 1.9 percent at $67.25 per barrel

West Texas Intermediate: DOWN 2.2 percent at $63.58 per barrel

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