Global stocks inch higher amid worry about war

Hong Kong/London — Stocks edged higher and bond prices slid on Tuesday as markets continued to retrace last week’s moves to safe-haven assets, focusing on corporate earnings prospects and the resilience of the US economy rather than tension in the Middle East.

Europe’s broad Stoxx 600 index rose 0.25%, a second day of gains, after Asian stocks had climbed earlier in the day, and the S&P 500 had closed up 1% on Monday.

Those moves marked something of a reversal after world shares slid on Friday, as traders sought to derisk their positions heading into the weekend when there was scope for geopolitical developments when markets were closed.

In addition, a host of “favourable” signs from the strength of the US consumer, economic growth and interest rates supporting bank profits, gave reasons for hope, said Kerry Craig, a global market strategist at JPMorgan Asset Management.

However, investors are also trying to assess risks that a wider conflict breaks out in the Middle East, which remains a “very fluid situation”, Craig said.

Benchmark 10-year bond yields in the US and Germany rose two to three basis points (bps) having risen 5bps-8bps on Monday — bond yields move inversely to prices.

The 10-year Bund yield was last 2.793%, and the 10-year treasury yield 4.7375%, having fallen 15bps last week — the biggest weekly decline since mid-July — and dipped as low as 4.53%, a sharp reversal from early October’s 16-year high of 4.887%.

“The basic theme in core [European] debt markets yesterday seemed to be a reversal of the risk-off tone that predominated on Friday,” said Rabobank strategists in a note.

Quarterly results

Top of mind for investors later on Tuesday are quarterly results from Goldman Sachs and Bank of America, after JPMorgan, Wells Fargo and Citigroup solidly beat expectations last Friday.

Morgan Stanley, pharmaceutical giant Johnson & Johnson, Tesla and Netflix are due later in the week.

In Middle East developments, US President Joe Biden will visit Israel on Wednesday as the country prepares to escalate an offensive against Hamas militants that has raised the fear of a broader conflict with Iran.

Iran’s foreign minister said Israel would not be allowed to act in Gaza without consequences, warning of “pre-emptive action” by the “resistance front” in the coming hours.

Israel’s shekel remained on the weak side of the four to the dollar level it softened to for the first time since 2015 on Monday.

Russian President Vladimir Putin on Tuesday arrived in Beijing to meet Chinese President Xi Jinping even as the war in Ukraine raged on.

The widely watched trip is aimed at showcasing the trust and “no-limits” partnership between the countries, as Beijing is moving to strengthen ties with counties for its infrastructure-focused Belt and Road initiative.

In a reminder of problems in China’s property sector, however, Tuesday marks the end of a 30-day grace period on a late payment from developer Country Garden. If investors do not receive the coupon payment, all of Country Garden’s offshore debts will be deemed in default.

In currency markets, the dollar index, which tracks the unit against six main peers was up 0.14% at 106.3, gaining on the euro, pound and yen.

The Swiss franc was last at Sf0.9509 to the euro after the common currency had fallen 0.9% against the safe haven on Friday to Sf0.94975, its lowest in a year.

Gold edged away from Friday’s three-week high of $1,932.53/oz and was last at $1,918.50/oz, and oil prices steadied after sliding more than $1 on Monday amid the hope the US would ease sanctions on producer Venezuela and as Washington stepped up efforts to prevent an escalation of the war between Israel and Hamas.

Brent crude futures were 0.1% higher at $89.70 a barrel.

Reuters