LDN - Business

World shares push higher, Europe calmer

[June 18, 2024] By Alun John and Rae Wee

LONDON/SINGAPORE (Reuters) -World shares ticked higher on Tuesday as an uneasy calm held in Europe and traders awaited remarks from a bevy of U.S. Federal Reserve officials, while the Australian dollar firmed after its central bank kept rates steady while warning about inflation.

Europe's STOXX 600 share index was up 0.2%, with the French benchmark flat, the spread between German and French bonds narrowed and the euro held steady.

This marked some stabilisation after French assets sold off sharply last week as investors feared President Emmanuel Macron's surprise decision to call a snap vote parliamentary vote would lead to a far-right-dominated parliament.

"Markets have been settling down after last week's moves in French government bonds and we have had some comments from (far-right leader Marine) Le Pen saying she was respectful of institutions," said Lee Hardman senior FX strategist at MUFG.

"But our bigger picture view hasn’t changed. We think the euro will continue to price in a higher political risk premium ahead of the election."

The European common currency was last down 0.1% against the dollar at $1.0722, though it was up a fraction on the pound.

The gap between French and German 10-year government bond yields - a gauge of risk premium on French government bonds – narrowed to 72 basis points after hitting 82.34 bps on Friday, its highest level since February 2017.

Also in French markets, shares in supermarket group Carrefour dropped by as much as 9.6% after reports in French media that the finance ministry was recommending a "record fine" against the company for management of its franchise network.

Earlier in the day, Asian shares <.MIAPJ0000PUS rose, following on from Monday's gains on Wall Street, and that left MSCI's world share index up 0.14%, not far off last week's all-time highs.

"Optimism over a resilient economy, improving corporate earnings and the potential start of rate cuts have supported equities, defying concerns that the rally has been concentrated in just a few mega-cap tech stocks," said Jameson Coombs, an economist at Westpac.

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A passerby walks past Japan's Nikkei stock prices quotation board outside a brokerage in Tokyo, Japan February 19, 2024. REUTERS/Issei Kato/File Photo

U.S. S&P 500 and Nasdaq fututures hovered either side of flat on Tuesday.

CENTRAL BANKS

The Reserve Bank of Australia was first up in a busy week for central banks. It kept rates at a 12-year high of 4.35% on Tuesday, as expected, but warned there were still reasons to be vigilant against inflation risks, and gave markets little sense of its future path.

The Australian dollar last traded flat at $0.6609.

"Uncertainty was once again a key theme within the (RBA's) statement," said economists at Commonwealth Bank of Australia.

"The upshot is that the Board is going out of its way not to provide any forward guidance given the cross currents in the economic data."

Central banks in Norway, Britain and Switzerland are also due to meet this week, where bets are for the former two to hold steady on rates and for the Swiss National Bank to deliver another 25 basis points (bps) of easing.

Over in the United States, no fewer than six Fed speakers are on the docket on Tuesday, and they could provide further clues on the U.S. interest rate outlook following last week's policy decision.

Futures now point to roughly 45 bps worth of Fed cuts priced in for the rest of 2024.

U.S. retail sales are also due later in the day. The U.S. 10-year benchmark treasury yield was steady at 4.29%, and, as well as being up on the euro, the dollar also firmed against the British pound and the Japanese yen.

Elsewhere, oil prices eased, with Brent crude futures down 0.46% at $83.87 per barrel.

Spot gold dipped 0.3% to $2,312 an ounce. [GOL/]

(Reporting by Rae Wee in Singapore; Editing by Jamie Freed, Michael Perry and Gareth Jones)

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