LONDON/HONG KONG (Reuters) – Global shares pushed to a record high on Tuesday, buoyed by better than expected Chinese export data as markets awaited the release of U.S. inflation data for further clues about the global economic recovery.
The surprisingly strong Chinese data implied that global demand remained strong and helped reassure investors that the world economy was healing from the COVID-19 pandemic, despite the spread of the Delta variant.
Focus now shifts to the release of U.S. consumer price data, expected to tick marginally lower from last month, and likely to further feed debate about when U.S. stimulus may be scaled down.
MSCI’s all-country equity index added 0.1%, having touched a record high earlier in the day. The pan-European STOXX 600 index slipped 0.2% after hitting a record high in early trading.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1%, its best daily gain since late June, led by a 1.6% rise in Hong Kong where tech stocks rose broadly. Japan’s Nikkei was up 0.5% while Australian shares slipped 0.02%.
A Reuters poll shows expectations for Tuesday’s inflation data to come in at 4.9% for the month of June when the numbers are released at 1230 GMT, compared to 5% the month before.
“Today will be one of the last numbers that are of strong inflation because of the base effect and from then we should have confirmation that inflation will be transitory,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners. “Inflation will remain a key feature for markets as it will drive interest rates.”
Investors are navigating a busy week, with the onset of U.S. earnings season and a testimony by Federal Reserve Chair Jerome Powell, which will also be scrutinised for any indications on the timing of potential U.S. tapering.
In Hong Kong, tech behemoth Tencent Holdings Ltd jumped 4.4% after China’s antitrust regulator on Tuesday approved its plan to take the country’s No.3 search engine Sogou Inc private in a $3.5 billion deal.
“We have clearly seen a (new) round of corrections of the technology sector which places a heavy weight on Hong Kong’s stock market, due to concerns over a new round of regulatory crackdown following the probe into Didi. Against this backdrop, there is room for short-term rebound,” said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management.
Overnight, Wall Street’s main indexes closed at their highest levels ever, lifted by Tesla and bank stocks.
The S&P 500 banks index climbed 1.3% ahead of quarterly earnings reports this week from major banks. JPMorgan Chase rose over 1% and Goldman Sachs rallied more than 2%, fuelling the Dow’s gains.
The next question is whether company earnings will support Wall Street’s run higher.
S&P 500 companies’ earnings per share for the June quarter are expected to rise 66%, according to IBES data from Refinitiv. JPMorgan, Goldman Sachs, Bank of America and other big banks kick off results from Tuesday.
Concerns that climbing cases of the Delta variant around the world could derail a global economic recovery have fuelled appetite for safe-haven U.S. Treasuries. The benchmark U.S. 10-year bond yield fell last week to a five-month low of 1.25%.
While markets have since stabilised, yields are not far off last week’s lows at 1.3745%.
Euro zone government bond yields have fallen in line with U.S. Treasuries in recent weeks, and are running close to their lowest levels since early April.
Germany’s 10-year bond yield was unchanged at -0.30%, close to a three-month low of -0.344% that was hit last week.
In currency markets, the dollar hardly moved against major currencies ahead of the U.S. inflation data. The greenback was broadly unchanged versus the euro at $1.1856 after its more than 2% rise versus the currency over the last month.
U.S. crude ticked up 0.7% to $74.63 a barrel. Brent crude rose 0.7% to $75.71 per barrel.
Gold was flat. Spot gold traded at $1806.91 per ounce.
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