Shares Get a Boost From Tech; Dollar Dithers Ahead of Inflation Data
LONDON—Global shares rose on Tuesday, taking their lead from an upbeat session on Wall Street ahead of key U.S. inflation data that could shape the outlook for Federal Reserve monetary policy.
Consumer inflation on Tuesday and wholesale data on Wednesday could offer investors evidence of how successful the Fed has been in taming price pressures, and an indication of how much more U.S. rates may need to rise.
In Europe, the STOXX 600 rose 0.3 percent in early trade, thanks to gains in the technology sector, as shares in Hexagon rose 4.6 percent after the Swedish industrial group said it had signed a collaboration agreement with Nvidia.
Nvidia shares have risen by nearly 200 percent this year, briefly pushing the company’s market value above $1 trillion, as investor enthusiasm for anything exposed to artificial intelligence has lifted the entire sector.
Anticipation of a flood of capital into chip-related companies also helped push Japan’s Nikkei index to its highest in 33 years on Tuesday.
On Monday, the S&P 500 and the Nasdaq rallied to their highest closing levels since April 2022.
The S&P 500 has entered a technical bull market, as gains in market heavyweights Amazon, Apple, and Tesla have lifted it by over 20 percent from its October 2022 lows. So far this year, the S&P has gained 13 percent, but its equal-weight equivalent, which dilutes the impact of the largest companies in the index, has risen just 3 percent.
The Fed is expected to take a break from raising rates, but surprise hikes from the Reserve Bank of Australia and the Bank of Canada last week have served as a reminder to investors that a pause in a rate cycle is sometimes just that and does not necessarily mark a shift to rate cuts.
“For me, it’s 50/50—they could hike—and I think they should, because it will give them more flexibility in July and for the rest of the year,” CMC Markets chief markets strategist Michael Hewson said.
“We are closer to ‘peak Fed’ than we are to anything else. So, for me, it’s a question of how much more juice has the dollar got before it rolls back down again. That is the key thing for me, because I can’t say, with any degree of confidence, that the Fed has any more than 25 basis points to go, if that, and I can’t say the same for the ECB, or the Bank of England,” he added.
The BoE meets next week and is forecast to raise interest rates by another quarter point, from 4.50 percent currently.
A Very British Problem
However, data on Tuesday that showed a rapid pickup in UK wage growth in the three months to April could complicate matters for the central bank, which is already grappling with inflation that is over four times its target of 2 percent.
“The key takeaway here is, not only was unemployment not ticking higher, we’ve got strong jobs growth and also wage growth is just extremely high right now and that’s going to be making the Bank of England feel very uncomfortable,” City Index senior markets analyst Fiona Cincotta said.
Money markets show traders now anticipate a peak in UK rates at around 5.6 percent by February, up from a terminal rate of 4.85 percent by November a month ago.
The European Central Bank, meanwhile, is expected to raise rates by 25 basis points on Thursday and signal it has more room to tighten policy, while the Bank of Japan is expected to maintain its ultra-loose policy after it meets on Friday.
In currencies, the dollar index, which measures the performance of the U.S. currency against six others, fell 0.3 percent to 103.27. Sterling rose 0.4 percent against the dollar to $1.2566 after the UK wage data, while the euro rose 0.43 percent to $1.0802.
The dollar dropped 0.1 percent against the yen to 139.51.
In commodities, Brent crude futures, which are 40 percent below where they were this time last year, were last up 0.85 percent at $72.47 a barrel, while U.S. crude futures rose 0.5 percent to $67.49. Gold rose 0.3 percent to $1,964 an ounce.
By Amanda Cooper
