[1/3] Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 30, 2023. REUTERS/Brendan McDermid
- Stocks rise ahead of key Fed, ECB and BOJ meetings next week
- Crypto markets were once again in turmoil as the SEC added Coinbase to the target list
- Oil prices remain steady as OPEC cuts profits and bond yields fall
LONDON/NEW YORK, June 6 (Reuters) – Global stock prices edged higher on Tuesday as investors speculated whether the recent rally in equities could be sustained, while government bond yields rose as traders backed bets that interest rate cuts sustained price pressure is imminent in the USA.
Wall Street, where the S&P 500 (.SPX) hit a near 10-month high on Monday, was in the black. The S&P 500 Index (.SPX) was up 0.2%, the Dow Jones Industrial Average (.DJI) was up 0.12% and the Nasdaq Composite Index (.IXIC) was up 0.28%.
The pan-European STOXX 600 index (.STOXX) was up 0.37%, while MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) was little changed. The MSCI’s broadest global equity index (.MIWD00000PUS) was up 0.25%.
With the major stock markets all in the black, investors could expect stocks to continue rising. Still, some analysts cautioned investors against false optimism.
The Reserve Bank of Australia delivered a surprise rate hike on Tuesday and while investors are largely expecting the Federal Reserve to hold off on raising rates next week, some analysts are warning that more rate hikes by the Fed are on the horizon.
“We would be careful not to give in completely to FOMO (fear of missing out),” analysts at Bank of America Securities said.
“A missed rate hike means no pause, inflation is still handcuffing the Fed (no high Fed rate) and a US recession remains on the horizon.”
The 2-year government bond yield, which normally moves in line with interest rate expectations, rose 4.6 basis points to 4.529%, while the 10-year bond yield rose 3.4 basis points to 3.727%.
Government bond yields – an indicator of lending rates – fell earlier after a survey by the European Central Bank (ECB) showed that euro-zone consumers had lowered their inflation expectations.
UK retail sales growth also slowed to a seven-month low as rising food prices prompted shoppers to limit spending on non-essential items, but this contrasted with overnight action Down Under.
Australia’s central bank hiked interest rates by a quarter point to 4.1% – an 11-year high – and warned further hikes may be needed to ensure inflation is brought back under control.
That drove the Australian dollar higher and set the bar for a number of key rate decisions elsewhere over the next few weeks, starting with Canada on Wednesday, which could also force another rate hike, said James Rossiter, senior global strategist at TD Securities.
“The last few months have been completely distracted by the banking crises and the US debt ceiling issue, but now we’re back to the macroeconomic dynamics that are driving central banks and the setting of their final interest rates.”
“The problem is that inflation just isn’t going as well as everyone expected and central banks are really struggling,” he added.
The US Federal Reserve, ECB and Bank of Japan all hold meetings next week.
Data on Monday showing the US services sector barely grew in May has led markets to price in an 82% chance the Fed will pause its rapid rate-hiking cycle, a sharp rise from the 36 percent probability the week before, according to CME FedWatch tool.
The dollar index, which measures the greenback against major world currencies, was up 0.2%.
But it was the Australian dollar’s 0.7% gain after the Reserve Bank of Australia’s surprise overnight that led the market. /FRX
The euro fell 0.2% to below $1.07, while the yen fell 0.10% to 139.69 per dollar and the pound sterling traded at $1.24080, down -0 on the day .2%.
CRYPTO crackdown
There was more bad news in the cryptocurrency markets as the U.S. Securities and Exchange Commission sued the largest U.S. crypto asset trading platform, Coinbase (COIN.O), a day after it also launched crypto exchange Binance had sued.
However, Bitcoin held its ground, rising 0.9% to $25,967.
Data company Nansen estimates that around $790 million has been drained from Binance and its US subsidiary in the past 24 hours.
When it comes to commodities, oil prices hardly changed after the world’s largest exporter, Saudi Arabia, announced that it would further cut production. Brent was down 0.13% to trade at $76.61 and US Crude was little changed at $72.18.
Reporting by Nell Mackenzie and Marc Jones; Edited by Dhara Ranasinghe and Mark Potter
Our standards: The Thomson Reuters Trust Principles.
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