A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Japan's Nikkei index and various countries' stock market index prices outside a brokerage in Tokyo, Japan, February 22, 2022.
A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Japan's Nikkei index and various countries' stock market index prices outside a brokerage in Tokyo, Japan, February 22, 2022. Reuters / KIM KYUNG-HOON

Global equities fell and the U.S. dollar advanced on Wednesday after stronger-than-expected economic data helped assuage concerns of high inflation and an impending recession driven partly by rising oil prices.

A report by the Institute for Supply Management (ISM) showed U.S. manufacturing activity picked up in May as demand for goods remained strong even amid rising prices.

The survey followed data released last Friday showing U.S. consumer spending, the largest contributor to American economic output, increased strongly in April, notwithstanding growing concerns of an imminent recession.

But market sentiment has remained bearish owing to the prevailing uncertainty caused by the pace of the U.S. Federal Reserve's interest rate hikes, and the impact of the Russia-Ukraine war on food and commodity prices.

"There's a lot of uncertainty. The market climbs a wall of worry and there's a lot to worry about," said Michael Ashley Schulman, chief investment officer at Running Point Capital in Los Angeles.

"If we have a recession it would be strange and unusual with nearly full employment, companies still hiring and huge demand for things," Schulman added.

The MSCI world equity index, which tracks shares in 50 countries, was down 1.13%. The pan-European STOXX 600 index fell 1.04%.

On Wall Street, all three main indexes were trading lower, driven by stocks in the financials, healthcare, technology and consumer discretionary sectors.

The Dow Jones Industrial Average fell 1.16% to 32,608.37, the S&P 500 lost 1.31% to 4,077.83 and the Nasdaq Composite dropped 1.37% to 11,916.38.

"The rising interest rates and inflation are just compressing valuations. You may like a company and it may be good and can continue to make profits but the valuation must still come down because your base interest rate is rising," Schulman added.

UPBEAT DATA

Oil prices continued to strengthen following the move by European Union leaders to gradually phase out Russian oil even as China ended its stiff COVID-19 lockdown in Shanghai, which could bolster demand for crude in an already tight market.

Brent crude was up 1.71% at $117.58 a barrel, while U.S. West Texas Intermediate crude gained 1.7% to $116.62.

The U.S. dollar rose against the euro, helped by upbeat U.S. economic data, and as the common currency remained under pressure following the hottest euro zone inflation on record that raised worries about the region's growth outlook.

The dollar index rose 0.835%, with the euro down 0.86% to $1.0641.

U.S. Treasury yields rose in choppy trading, as concerns about recession hitting the world's largest economy have eased with the Federal Reserve still on course to undertake aggressive tightening this year.

Benchmark U.S. 10-year yields hit a two-week high of 2.9368%, while two-year yields also climbed to a two-week peak of 2.668%.

Gold prices inched up from a two-week low, supported by worries over rising inflation, although a stronger dollar and rising U.S. yields kept gains in check.

Spot gold rose 0.7% to $1,849.10 an ounce, while U.S. gold futures gained 0.11% to $1,844.70 an ounce.