(Bloomberg) — European stocks followed Asian shares higher after a rally in large US tech companies drove Wall Street to another record peak.
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The Stoxx Europe 600 benchmark staged a modest recovery amid lingering concern about political turmoil in France. US futures were steady after the S&P 500 advanced to an all-time high for the 30th time this year, defying concern about narrow breadth and higher-for-longer US interest rates.
Ahead of Wednesday’s holiday in the US, traders geared up for retail-sales data and a slew of Federal Reserve speakers. Treasuries were steady after falling Monday amid a flurry of high-grade corporate bond sales that exceeded $21 billion. A gauge of the dollar was flat.
“The picture being painted is that despite the fading prospects of sizeable interest rate cuts from the Fed this year, the economic outlook remains upbeat and this means that corporate earnings should continue to hold up,” said Stuart Cole, the head macro economist at Equiti Capital UK Ltd. “But everybody – the Fed, the markets, etc. – is in ‘data dependancy’ mode, and this sentiment could potentially sour if we get a soft set of retail sales data from the US this afternoon.”
Optimism over a resilient economy, improving corporate earnings and the potential start of rate cuts have pushed US equities up about 15% this year. The US benchmark index topped 5,470 Monday, with Tesla Inc. and Apple Inc. leading gains in megacaps. The Nasdaq 100 came closer to the 20,000 mark as Micron Technology Inc. climbed to a record.
European stocks have retreated since French President Emmanuel Macron called a snap legislative ballot following a drubbing by Marine Le Pen’s National Rally in the European Parliament elections. The two-round election will conclude on July 7.
“A portion of the recent risk off moves have been driven by fears of ‘Frexit’ and euro area breakup. In our view, those fears are overblown, and we would be fading the fear driven moves,” said Mohit Kumar, a strategist at Jefferies. “We remain positive on risky assets, but would skew our positions more towards the US in view of the coming French elections.”
Investors will keep a close watch on the implications of Beijing’s latest move in its trade tensions with Brussels, after China launched an anti-dumping probe on pork imports from the European Union. That comes as the bloc looks at Chinese subsidies across a range of industries and will impose tariffs on electric car imports from July.
The Australian dollar extended earlier gains after Reserve Bank Governor Michele Bullock said in a press conference that the central bank discussed the case for a rate hike at its policy meeting. Policymakers kept their benchmark interest rate at a 12-year high of 4.35% for a fifth straight gathering.
“The RBA’s hawkish posturing has been maintained, but that is no surprise to markets,” said Charu Chanana, head of foreign-exchange strategy at Saxo Markets. “The Aussie’s path is likely to continue to focus on external factors, and is looking bearish in the near-term given the resurgent US dollar and slowing momentum in China and commodities.”
Asia chip stocks were among the biggest contributors to gains in the MSCI Asia Pacific index. Shares of Tesla China suppliers advanced after news the electric-car maker had gained approval to test its advanced driver-assistance system on some Shanghai streets. In South Korea, shares of SK Hynix Inc. rose to a 24-year high as an analyst said the chipmaker may see upward revisions to its future earnings consensus.
In commodities, oil edged lower after the biggest advance in a week Monday as risk-on sentiment in wider markets countered a mixed outlook for crude. Copper rose from its lowest close since mid-April. Gold was little changed.
Key events this week:
Eurozone CPI, Tuesday
US retail sales, business inventories, industrial production, Tuesday
Fed’s Thomas Barkin, Lorie Logan, Adriana Kugler, Alberto Musalem, Austan Goolsbee speak, Tuesday
UK CPI, Wednesday
US Juneteenth holiday, Wednesday
China loan prime rates, Thursday
Eurozone consumer confidence, Thursday
UK BOE rate decision, Thursday
US housing starts, initial jobless claims, Thursday
Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
US existing home sales, Conf. Board leading index, Friday
Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 9:24 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average fell 0.1%
The MSCI Asia Pacific Index rose 0.6%
The MSCI Emerging Markets Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0719
The Japanese yen fell 0.2% to 158.10 per dollar
The offshore yuan was little changed at 7.2759 per dollar
The British pound fell 0.2% to $1.2681
Cryptocurrencies
Bitcoin fell 1.1% to $65,635.01
Ether fell 2% to $3,442.1
Bonds
The yield on 10-year Treasuries was little changed at 4.28%
Germany’s 10-year yield advanced one basis point to 2.42%
Britain’s 10-year yield declined one basis point to 4.10%
Commodities
Brent crude fell 0.2% to $84.05 a barrel
Spot gold fell 0.2% to $2,313.71 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani, Michael Msika and Aya Wagatsuma.
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