LONDON – Global shares paused their rally on Tuesday after recent hefty gains even as expectations for a thawing in global trade tensions kept risk appetite keen, while the bull run in tech stocks counted on a bumper round of mega-cap earnings this week.
The likelihood of lower borrowing costs in the U.S. and Canada this week supported bonds, and weighed on the dollar as investors waited to see just how dovish the Federal Reserve might be on the outlook.
Meanwhile, safe-haven gold fell back below $4,000 an ounce as a drop of almost 10% in six sessions squeezed leveraged money out of what were very crowded trades.
“There is a fundamental reason why gold has gone up and that is mostly demand from central banks,” said George Lagarias, chief economist at Forvis Mazars.
“What we’re seeing is a very natural and, dare I say, welcome correction. The market needs to cool off and proceed at a more natural pace,” Lagarias added.
STOCKS PAUSE AFTER RECORDS
Several global share markets that have recently surged to all-time highs took a breather on Tuesday.
Europe’s STOXX 600 was down 0.2% after hitting a lifetime high on Monday. Major bourses in Frankfurt, Paris and London were little changed on the day.
Spain’s IBEX inched up to touch a new record, its first time at a peak since the onset of the financial crisis in 2007.
Japan’s Nikkei eased 0.6%, having surged 2.5% on Monday as a rally in all things tech lifted it to gains of almost 27% so far this year.
Japan’s new Prime Minister Sanae Takaichi met U.S. President Donald Trump in Tokyo to discuss defence ties, trade and a package of investments in the U.S. in a $550 billion deal struck earlier this year.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged down 0.6%, while Chinese blue chips slipped 0.2%. The Shanghai Composite Index cracked the 4,000 barrier for the first time since mid-2015, although it closed below.
S&P 500 futures and Nasdaq futures were little changed near all-time peaks.
Tech stocks had again led Wall Street higher on Monday, with Qualcomm jumping 11% after it unveiled two artificial intelligence chips for data centres.
There are lofty expectations for the “Magnificent Seven” tech heavyweights reporting this week, with Microsoft, Alphabet, Apple, Amazon and Meta Platforms all needing strong results to justify stretched valuations.
Aiming to curb expenses, Amazon is planning to cut as many as 30,000 corporate jobs starting on Tuesday, sources told Reuters.
FED TO CUT RATES
In bond markets, 10-year Treasury yields slipped to 3.98% as investors wait on Wednesday’s Fed meeting. A quarter-point rate cut is considered a done deal, with the real focus on whether the Fed validates market pricing for a December easing as well.
“It is a given that we see a rate cut,” Forvis Mazars’s Lagarias said.
“The questions for me are: will the Fed signal its intentions for December and will we see further dissent towards lower rates apart from Stephen Miran?”
There are also some expectations the Fed will end the rundown of its balance sheet, otherwise known as quantitative tightening.
Canada’s central bank is also expected to cut rates this week, while the European Central Bank and the Bank of Japan are seen holding steady.
The BOJ is likely to debate whether conditions are right to resume rate hikes as worries about a tariff-induced recession ease, but political complications may keep it on hold for now.
The yen strengthened as U.S. Treasury Secretary Scott Bessent called for “sound monetary policy” during a meeting with Japanese counterpart Satsuki Katayama. The dollar was last down 0.6% to 152.05 yen, having stopped short of the recent 153.29 peak on Monday.
The euro nudged up to $1.1648. The dollar index eased 0.1% to 98.69, but remained well within the recent trading range.
In commodity markets, oil prices eased on a Reuters report that eight OPEC+ nations are leaning towards making another modest increase in oil output for December when they meet on Sunday, as Saudi Arabia pushes to reclaim market share.
Brent dropped 1.9% to $64.40 a barrel, while U.S. crude eased 1.8% to $60.23 per barrel.
(Reporting by Samuel Indyk and Wayne Cole; Editing by Jamie Freed, Aidan Lewis)