Markets were in consolidation mode on Tuesday, with world stocks hovering just off record highs, the dollar lifted by upcoming inflation data and the main volatility gauges all looking reassuringly calm.
There was some pressure on sterling as the UK government considered whether to delay removing most of its remaining coronavirus restrictions by two weeks, but it looked like being temporary at worst.
London’s FTSE (.FTSE) was up 0.2% in line with the pan European STOXX 600 (.STOXX). MSCI’s 50-country world index (.MIWD00000PUS) was flush to its latest record high and Wall Street futures were steady after its tech titans shrugged off global plans to tax them more over the weekend. read more
In the bond markets, government bond yields were edging lower ahead of a policy meeting of the European Central Bank (ECB) and U.S. inflation data, both due on Thursday.
Recent comments have suggested that the ECB has no plans to start reeling in its mass stimulus programme any time soon, while the U.S. May consumer price index print will be closely watched ahead of a Federal Reserve meeting next week.
“The consensus ahead of the ECB meeting has pretty much settled on the view that the Governing Council will keep the faster pace of asset purchases via the pandemic emergency purchase programme for another quarter,” ING analysts said.
But they also acknowledged that “the bar for a dovish surprise has been set high”.
The U.S. dollar looked to have found some support again having been sapped by last week’s softer-than-expected payrolls data.
The dollar’s index against a basket of six major currencies stood at 90.136, up 0.2% on the day and off the 89.533 4 1/2-month low touched late last month. It has been idling around there while investors try to gauge the U.S. recovery and policy response.
“Worries remain that the Fed may start discussing tapering asset purchases at next week’s FOMC meeting,” said Philip Wee, an FX strategist at Singapore’s DBS Bank. “More so after U.S. Treasury Secretary Janet Yellen’s comment that higher U.S. interest rates would be good for the economy.”
In a weekend interview, Yellen said slightly higher rates “would actually be a plus for society’s point of view and the Fed’s point of view”.
DELAY
Sterling was meanwhile down 0.3% on the uncertainty over COVID-19 restrictions removal. The British government had planned to lift almost all remaining restrictions but has seen case numbers start to rise again over the last couple of weeks.
“The world wants to get itself short sterling,” said Societe Generale’s Kit Juckes. “I don’t think it will last, a two-week delay to easing restrictions, that really is very temporary.”
Overnight in Asia, Tokyo’s Nikkei 225 (.N225) had inched down 0.2% as losses in market heavyweights offset gains for drugmakers after Eisai Co’s (4523.T) Alzheimer drug had received U.S. regulatory approval.
China’s benchmark CSI300 Index (.CSI300) dropped 0.9% weighed down by lofty valuations and Sino-U.S. tensions. Australia’s S&P/ASX 200 (.AXJO) was the only major index remaining in positive territory, closing up 0.15%.
Among the main commodities, oil prices lost ground as lingering concerns about the fragile state of the global recovery were heightened by data showing China’s oil imports fell in May.
Brent crude widened losses in London to sit at $70.87 a barrel, off 0.9%. U.S. oil was down by 53 cents, or 0.7%, at $68.76 a barrel.
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