by Global shares edged higher on Tuesday as a tense calm spread across Europe, with traders awaiting comments from a host of U.S. Federal Reserve officials, but the Australian dollar strengthened after the central bank kept interest rates unchanged and warned of inflation. The European stock index STOXX 600 rose 0.2 percent, while the French benchmark index (.FCHI) was unchangedOpens in a new tab, spreads on German and French government bonds narrowed and the euro held steady.
This marked some stabilization after French assets slumped last week after President Emmanuel Macron’s sudden decision to call a general election left investors worried that parliament would be taken over by far-right forces. “Markets have calmed down following last week’s French bond action and we’ve heard comments from (far-right leader Marine) Le Pen that she respects French bonds,” said Lee Hardman, senior currency strategist at MUFG. “But our overall view remains the same: we believe the euro will continue to price in a political risk premium ahead of the election,” he said. The European common currency recorded a small gain against the pound but was last down 0.1 percent to $1.0722 against the dollar.
The spread between French and German 10-year government bond yields, a measure of the risk premium on French government bonds, narrowed to 72 basis points after hitting 82.34 basis points on Friday, the highest since February 2017. Also in France, supermarket group Carrefour (CARR.PA) shares fell as much as 9.6% after French media reported that the finance ministry had imposed a “record fine” on the company for its management of its franchise network. . Earlier in the day, Asian shares rose <.MIAPJ0000PUS(.N225) following Monday’s gains on Wall Street, with the MSCI World Index up 0.14%, not far from last week’s record high. “A robust economy, rising corporate profits and optimism about the possibility of interest rate cuts starting to come into effect supported stocks, defying concerns that the gains were concentrated in a few mega-cap tech stocks,” Westpac economist Jameson Coombs said. U.S. S&P 500 and Nasdaq futures traded on either side of the zero line on Tuesday.
Central Banks The Reserve Bank of Australia kicked off a busy week for central bankers. As expected, the Fed kept interest rates unchanged at a 12-year high of 4.35 percent on Tuesday, but warned there was still reason to be cautious about inflation risks, giving markets few clues about its future trajectory.The Australian dollar was last changed to $0.6609. “Uncertainty was again a key theme in the (RBA) statement,” Commonwealth Bank of Australia economists said. “The bottom line is that the board is making every effort not to make future projections, given the economic indicators to the contrary.” The central banks of Norway, the UK and Switzerland also meet this week. It is expected that the first two will hold interest rates steady, with the Swiss National Bank easing by another 25 basis points.
More than six Fed speakers are on the agenda in the US on Tuesday, and they may provide further guidance on the US interest rate outlook following last week’s monetary policy decision. Futures currently suggest the Fed is pricing in around 45bp of rate cuts by the end of 2024. US retail sales are also expected later in the day. The 10-year U.S. Treasury yield was stable at 4.29%, and the dollar strengthened against the euro as well as the British pound and the Japanese yen. Elsewhere, oil prices fell, with Brent crude futures down 0.46% to $83.87 a barrel. Spot gold prices fell 0.3% to $2,312 an ounce.
