Alan John and Ray V
LONDON/SINGAPORE (Reuters) – Global shares rose on Tuesday amid a worrying calm in Europe and traders awaiting comments from the U.S. Federal Reserve panel, while the Australian dollar strengthened after its central bank kept rates unchanged stable, warning of inflation.
The European share index rose 0.4%, the French index rose by the same amount, the spread between German and French bonds narrowed and the euro remained stable.
It marked some stabilization after a sharp sell-off in French assets last week as investors feared President Emmanuel Macron’s surprise decision to call an early parliamentary vote would lead to parliament being dominated by the far right.
“Markets are calming after last week’s moves in French government bonds and we have received some comments from (far-right leader Marine) Le Pen saying she is respectful of institutions,” said Lee Hardman, senior currency strategist at MUFG.
“But our bigger picture hasn’t changed. We think the euro will continue to command a higher political risk premium in the run-up to the elections.”
The European single currency was last seen down 0.2% against the stronger dollar at $1.0713, although the pound remained steady.
The gap between French and German 10-year government bond yields, a measure of the risk premium on French government bonds, narrowed to 71 basis points after hitting 82.34 bps on Friday, its highest level since February 2017.
Also in the French markets are shares of the supermarket group. Carrefour (EPA:) fell 6.5% after reports in French media that the Finance Ministry was recommending a “record fine” for the company’s management of its franchise network.
Earlier in the day, Asian shares <.MIAPJ0000PUS rose after Monday's gains on Wall Street, where indexes and the Nasdaq hit record closing highs. [.N]
As a result, the MSCI global share index rose 0.17%, not far from last week’s all-time high.
Futures for the American indices S&P 500 and Nasdaq fluctuated on both sides of the flat on Tuesday.
CENTRAL BANKS
The Reserve Bank of Australia was the first to rise in a busy week for central banks. On Tuesday, as expected, it kept rates at a 12-year high of 4.35%, but warned there were still reasons to be vigilant about inflation risks and gave markets no indication of the path ahead.
The Australian dollar was last trading unchanged at $0.6609.
“Uncertainty is once again a key theme in the RBA’s statement,” said economists at Commonwealth Bank of Australia (OTC:).
“As a result, the Board is at pains to avoid providing any forward-looking guidance given the inconsistent trends in economic data.”
The central banks of Norway, Britain and Switzerland are also due to meet this week, where bets are that the first two will keep rates steady and the Swiss National Bank will implement another 25 basis points (bps) of easing.
Bank of England watchers are more focused on Wednesday’s UK inflation, which could provide more clues about the central bank’s rate path this year than Thursday’s meeting.
In the United States, there will be no fewer than six speakers on the Fed speaker’s slate on Tuesday, and they could provide further clues about the outlook for US interest rates following last week’s policy decision.
Futures now point to a Fed rate cut of about 45 bps. until the end of 2024.
US retail sales are also due out later in the day. The 10-year U.S. Treasury yield remained steady at 4.29%.
Elsewhere, oil remained steady with futures at $84.23 a barrel. [O/R]
fell 0.37% to $2,310 an ounce. [GOL/]