LONDON/SINGAPORE: World shares rose on Tuesday as an uneasy calm held in Europe and traders awaited remarks from a bevy of U.S. Federal Reserve officials, while the Australian dollar held firm after its central bank kept rates steady while warning about inflation.
Europe’s STOXX 600 share index was 0.4% higher, with the French benchmark up a similar amount, the spread between German and French bonds narrowed and the euro held steady.
This marked some stabilisation after French assets sold off sharply last week as investors feared President Emmanuel Macron’s surprise decision to call a snap vote parliamentary vote would lead to a far-right-dominated parliament.
“Markets have been settling down after last week’s moves in French government bonds and we have had some comments from (far-right leader Marine) Le Pen saying she was respectful of institutions,” said Lee Hardman, senior FX strategist at MUFG.
Asian markets rise with Wall St as traders eye latest US data
“But our bigger picture view hasn’t changed. We think the euro will continue to price in a higher political risk premium ahead of the election.”
The European common currency was last down 0.2% against the broadly stronger dollar at $1.0713, though it was steady on the pound.
The gap between French and German 10-year government bond yields - a gauge of risk premium on French government bonds – narrowed to 71 basis points after hitting 82.34 bps on Friday, its highest level since February 2017.
Also in French markets, shares in supermarket group Carrefour dropped by 6.5% after reports in French media that the finance ministry was recommending a “record fine” against the company for management of its franchise network.
Earlier in the day, Asian shares rose, following on from Monday’s gains on Wall Street, where both the S&P 500 and Nasdaq scored record closing highs.
That left MSCI’s world share index up 0.17%, not far off last week’s all-time highs.
U.S. S&P 500 and Nasdaq futures hovered either side of flat on Tuesday.
Central banks
The Reserve Bank of Australia was first up in a busy week for central banks. It kept rates at a 12-year high of 4.35% on Tuesday, as expected, but warned there were still reasons to be vigilant against inflation risks, and gave markets little sense of its future path.
The Australian dollar last traded flat at $0.6609.
“Uncertainty was once again a key theme within the (RBA’s) statement,” said economists at Commonwealth Bank of Australia.
“The upshot is that the Board is going out of its way not to provide any forward guidance given the cross currents in the economic data.”
Central banks in Norway, Britain and Switzerland are also due to meet this week, where bets are for the former two to hold steady on rates and for the Swiss National Bank to deliver another 25 basis points (bps) of easing.
BoE watchers are more focused on British inflation due Wednesday which could give more clues on the central bank’s rate path this year than Thursday’s meeting.
Over in the United States, no fewer than six Fed speakers are on the docket on Tuesday, and they could provide further clues on the U.S. interest rate outlook following last week’s policy decision.
Futures now point to roughly 45 bps worth of Fed cuts priced in for the rest of 2024.
U.S. retail sales are also due later in the day. The U.S. 10-year benchmark Treasury yield was steady at 4.29%, and, as well as being up on the euro, the dollar also firmed against the British pound and the Japanese yen.
Elsewhere, oil was steady with Brent crude futures flat at $84.23 per barrel.
Spot gold dipped 0.37% to $2,310 an ounce.
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