MSCI’s global equities gauge pared earlier gains yesterday as it saw little support from Wall Street where investors waited anxiously for inflation data while the dollar dipped with oil prices on hopes for easing Middle East tensions after Iran and Israel halted attacks on each other.
US Treasury yields edged lower as traders waited for May’s consumer inflation report, due out today, for signs of whether price pressures are continuing to build. The S&P 500’s heavyweight technology sector could not hold earlier gains, putting pressure on the benchmark index and tech-heavy Nasdaq.
Gene Goldman, chief investment officer at Cetera, pointed to anxiety ahead of the economic data as investors worry that elevated inflation would fuel worries about the Federal Reserve’s next moves. “There is a lingering bit of caution as investors are a bit worried about tomorrow’s potentially high inflation readings. Higher-than-expected inflation further brings the Fed to the forefront as a headline risk,” Goldman said.
Since the release, on Friday, of a stronger than expected jobs report for May, traders have increased bets that the Fed’s next move will be a rate increase rather than a cut, with the probability for a 25-basis point increase by December now at 43.4 per cent and bets on a 50-basis point increase at about 21pc, up from 12pc last week, according to CME Group’s FedWatch tool.
On Wall Street, the Dow Jones Industrial Average rose 145.62 points, or 0.29pc, to 50,931.63, the S&P 500 fell 16.64 points, or 0.22pc, to 7,389.09 and the Nasdaq Composite fell 179.07 points, or 0.69pc, to 25,750.59. MSCI’s gauge of stocks across the globe was up 3.23 points, or 0.29pc, at 1,104.19 after earlier rising more than 1pc. The pan-European STOXX 600 index rose 0.18pc after paring earlier gains.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.22pc to 99.82, with the euro up 0.23pc at $1.1561. Against the Japanese yen, the dollar strengthened 0.04pc to 160.23.
In government bonds, the yield on benchmark U.S. 10-year notes fell 0.2 basis points to 4.548pc, from 4.55pc late on Monday while the 30-year bond yield rose 0.3 basis points to 5.0272pc. The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.7 basis points to 4.141pc, from 4.158pc late on Monday.
In energy markets, US crude fell 3.94pc to $87.70 a barrel and Brent fell to $91.11 per barrel, down 3.33pc on the day.
Meanwhile, most Gulf markets ended higher yesterday after Iran and Israel said they had halted attacks, though Tehran warned the truce would end if Israel kept striking Hizbollah in Lebanon.
Saudi Arabia’s benchmark index gained 1.3pc, with the country’s biggest lender by assets, Saudi National Bank, climbing 4.2pc.
Dubai’s main share index advanced 0.9pc, led by a 2pc rise in top lender Emirates NBD. In Abu Dhabi, the index was up 0.8pc. The easing regional geopolitical tensions and rising expectations of a diplomatic breakthrough have helped GCC stock markets rebound, but with conditions changing rapidly, investors are likely to remain cautious and volatility may persist despite the improvement in sentiment, said Daniel Takieddine, co-founder and CEO, Sky Links Capital Group.
The Qatari index - which declined more than 2pc on Monday - rebounded 1.9pc, buoyed by a 1.2pc gain in the Gulf’s biggest lender Qatar National Bank.
Outside the Gulf, Egypt’s blue-chip index advanced 1pc. Egypt’s annual inflation rate is expected to have eased to 14.5pc in May, pulled lower by favorable base effects, a Reuters poll showed on Monday, though analysts warn the respite will be short-lived as electricity price hikes and other pressures push prices higher in coming months.
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