Global stocks calm ahead of US inflation data

Markets were in consolidation mode on Tuesday, with world stocks hovering just off record highs, the dollar lifted by coming inflation data and the main volatility gauges all looking reassuringly calm.

There was some pressure on sterling as the UK government considered whether to delay removing most of its remaining coronavirus restrictions by two weeks, but it looked like being temporary at worst.

London’s FTSE was up 0.2% in line with the pan-European Stoxx 600. MSCI’s 50-country world index was close to its latest record high and Wall Street futures were steady after its tech titans shrugged off global plans at the weekend to tax them more.

In the bond markets, yields on government securities were edging lower ahead of a policy meeting of the European Central Bank and US inflation data, both due on Thursday.

Recent comments suggest that the ECB has no plans to start reeling in its mass stimulus programme any time soon, while the US May consumer price index print will be closely watched ahead of a Federal Reserve meeting next week.

“The consensus ahead of the ECB meeting has pretty much settled on the view that the governing council will keep the faster pace of asset purchases via the pandemic emergency purchase programme for another quarter,” ING analysts said.

But they also acknowledged that “the bar for a dovish surprise has been set high”.

The dollar looked to have found some support again, having been sapped by last week’s softer-than-expected payrolls data.

The dollar’s index against a basket of six major currencies stood at 90.136, up 0.2% on the day and off the 89.533, 4½-month reached late last month. It has been idling there while investors try to gauge the US recovery and policy response.

“Worries remain that the Fed may start discussing tapering asset purchases at next week’s FOMC meeting,” said Philip Wee, an FX strategist at Singapore’s DBS Bank. “More so after US Treasury Secretary Janet Yellen’s comment that higher US interest rates would be good for the economy.”

In a weekend interview, Yellen said slightly higher rates “would actually be a plus for society’s point of view and the Fed’s point of view”.

Sterling was 0.3% weaker on the uncertainty about the removal of Covid-19 restrictions. The UK government had planned to lift almost all remaining restrictions, but infection rates have started to rise again in recent weeks.

“The world wants to get itself short sterling,” said Kit Juckes of Société Générale. “I don’t think it will last, a two-week delay to easing restrictions, that really is very temporary.”

In Asia, Tokyo’s Nikkei 225 inched down 0.2% overnight as losses in market heavyweights offset gains for drugmakers after Eisai’s Alzheimer drug had received US regulatory approval.

China’s benchmark CSI300 Index dropped 0.9%, weighed down by lofty valuations and Sino-US tensions. Australia’s S&P/ASX 200 was the only major index remaining in positive territory, closing 0.15% higher.

Among the main commodities, oil prices lost ground as lingering concerns about the fragile state of the global recovery were heightened by data showing China’s crude imports fell in May.

Brent crude widened losses in London to sit at $70.87/bbl,  off 0.9%. US oil was down 53c, or 0.7%, at $68.76/bbl.