Sign up to myFT Daily Digest to be the first to know about Equities news.
Wall street rose and European stocks inched to new highs on Tuesday as investors awaited the release of key US inflation data.
The S&P 500 index of blue-chip US stocks eked out a 0.1 per cent gain, as did the tech-focused Nasdaq Composite. In Europe, the regional Stoxx 600 index gained 0.4 per cent, touching new all-time highs led by gains in the travel and leisure sector, which rose 1.9 per cent. The UK’s FTSE 100 gained 0.1 per cent.
Inflation readings out of the US on Wednesday will provide investors with further clues as to how soon the Federal Reserve may roll back its ultra-loose policies, which have supported global markets throughout the pandemic.
The dollar edged up towards its July peak compared with a basket of currencies, while US government bonds fell back further following hawkish statements from Fed committee members on Monday. The yield on the benchmark US 10-year Treasury rose to its highest in three weeks on Tuesday, touching 1.34 per cent — a 20 basis point rise since last week’s six-month lows.
“The market remains torn between strong economic data calling for an earlier than expected stimulus withdrawal and whether a resurgence in the Delta variant may pause the recovery,” noted Steen Jakobsen at Saxo Bank.
Economists polled by Bloomberg forecast consumer prices to have ticked up 0.5 per cent in July compared with the previous month, a slower pace than in June. On a year-on-year basis, the inflation rate is expected to have eased to 5.3 per cent, from 5.4 per cent in June.
Strong job creation data out of the US at the end of last week coupled with a record 10m vacancies advertised in July, according to data released Monday, have heightened speculation that rate cuts may come sooner than investors had previously thought.
“Analysing why labour force participation plunged in the pandemic, we conclude that unemployment will fall below pre-Covid levels by the end of 2022. We’re moving up our forecasts for Fed tapering” to December 2021, analysts at Morgan Stanley wrote. They also expect the Fed’s first rate increase to come in mid-2023.
In Asia, markets were mixed as the Delta coronavirus variant spread rapidly across the region. Covid-19 infection figures out of China on Monday appeared to show the most serious resurgence of the disease in the world’s second-largest economy since mid-2020; Beijing has increased testing and travel restrictions in recent days.
Hong Kong’s Hang Seng index rose 1.3 per cent and the onshore CSI 300 gained 1.2 per cent, led by technology shares recovering ground lost in recent weeks as investors were rattled by a government crackdown. South Korea’s Kospi fell 0.5 per cent.
Oil recovered some ground after sliding more than 9 per cent in the past week, with the global Brent crude benchmark rising 1.3 per cent to $69.92. Worries that the spread of the virus could dent fuel demand in China were countered by optimism that the $1tn US infrastructure package, set to be voted through on Tuesday, would increase demand. West Texas Intermediate, the US benchmark, gained 1.6 per cent.
The price of the benchmark 10-year German bund rose, causing its yield to fall 0.01 percentage points to minus 0.47 per cent, after a key indicator of Germany’s economic prospects dropped sharply in data released on Tuesday. Expectations for the country’s economic performance declined for a third consecutive month, falling well below economists’ expectations on worries about a possible fourth wave of the pandemic and slowing growth in China.
Unhedged — Markets, finance and strong opinion
Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent straight to your inbox every weekday