A global equity benchmark and two key European stock indices hit new highs on Tuesday, as the dollar rose in anticipation of faster inflation as volatility fell to lows last seen before. the coronavirus pandemic.
U.S. Treasury debt yields fell to their lowest in more than a month, while eurozone bond yields fell with markets in a wait-and-see mood ahead of a policy meeting of the European Central Bank and US inflation data, both due Thursday.
The 10-year US Treasury note fell 3.4 basis points to 1.5364%, suggesting bond investors do not see a spike in inflation despite lingering nervousness over the Federal Reserve’s insistence that ‘a probable rise in consumer prices is transitory.
Markets remained calm ahead of the release of second quarter results in July, when very strong results will be announced because a year ago they were so dismal, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Va. .
“Knowing that there is a strong earnings season ahead takes some worry away,” Tuz said, preventing stock prices from falling. “The markets are about as flat and calm as they can be today.”
MSCI’s All Country World Index, a US-centric benchmark for global stock markets (.MIWD00000PUS), closed 0.01% lower at 716.96 after hitting a new intraday high of 718.19.
In Europe, the FTSEurofirst 300 pan index (.FTEU3) rose 0.08% to close at a new high, while the STOXX 600 index (.STOXX) rose 0.15% to also establish a new highest closing.
Telecommunications, travel and real estate stocks in Europe have pushed stock markets higher, but weak German industrial production data and doubts that Britain will lift remaining pandemic restrictions later this month have capped gains .
The Travel and Leisure Index (.SXTP) rose 1.8%, supported largely by gains at low-cost carrier easyJet (EZJ.L) after Goldman Sachs upgraded the stock to ” buy”.
All three of Wall Street’s major indices rose, with big tech stocks FAANG leading stocks higher as the prospect of falling inflation makes their long-term earnings more valuable.
“We have seen the FAANGs go back in reaction to people who buy into the story of transient inflation,” said Simon Maughan, head of trading alpha at Liquident, an alternative trading platform.
Amazon.com Inc (AMZN.O) and Apple Inc (AAPL.O) rose while Google’s parent company Alphabet Inc (GOOGL.O) and Facebook Inc (FB.O) fell.
Advancing stocks outnumbered declining stocks on the Nasdaq and the New York Stock Exchange, while growth-oriented stocks (.RLG) slightly outpaced the gains of undervalued value stocks (.RLV) .
The Dow Jones Industrial Average (.DJI) slipped 0.09%, the S&P 500 (.SPX) gained 0.02% and the Nasdaq Composite (.IXIC) added 0.31%.
Shares of electric car maker Tesla (TSLA.O) fell 0.3% after rising earlier on data from Beijing which showed its Chinese sales – which account for a third of the company’s total sales – had experienced a 29% jump last month. Read more
The data also showed that overall sales of new electric vehicles in China were up 177% from a year ago.
As a sign of investor convenience, the stock market’s so-called “fear gauge”, the VIX (.VIX), fell to 15.15, a level not seen since February 2020.
Sterling was under pressure as the UK government considered delaying the removal of most of its remaining coronavirus restrictions and oil was in the doldrums, but both appeared to be temporary phenomena at worst.
Recent comments suggest that the European Central Bank has no plans to launch its mass stimulus package anytime soon.
“I would expect the ECB to maintain an accommodative stance as it would not want to be seen as heading for a cut at this time,” said Lombard Odier, head of currency strategy at Vasileios Gkionakis.
The dollar index rose 0.148%, with the euro down 0.13% to $ 1.2173. The Japanese yen weakened 0.22% against the greenback to 109.49 per dollar.
US gold futures were down 0.2% to $ 1,894.40 an ounce.
Brent crude futures were up 73 cents to $ 72.22 a barrel. US crude futures rose 82 cents to $ 70.05 a barrel.
Overnight in Asia, Tokyo’s Nikkei 225 (.N225) edged down 0.2%, as market heavyweight losses offset gains by drugmakers after Eisai Co’s Alzheimer’s drug ( 4523.T) has received US regulatory approval.
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