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LONDON/TOKYO (Reuters) – Stocks were mostly resilient and oil hovered near recent highs on Tuesday as investors stayed positive over global economic prospects even as data showed signs of risks.
European stocks fell 0.2%, stepping back from a 2% gain in July, its second month of gains.
UK stocks edged up 0.1%, however, with HSBC (LON:HSBA) climbing 2.6% after announcing a $2 billion share buyback and raising its key profitability target.
Investors are readying for an end to a series of U.S. Federal Reserve interest rate hikes, with an increase last week widely seen as one of the last in its current tightening cycle.
“Markets are fully focusing on the bright side of the puzzle,” said Sandrine Perret, portfolio manager at Unigestion. “The market reaction since last week, after the Fed rally, has been really strong and resilient.”
Wall Street futures indexes were set to open flat. The MSCI world equity index, which tracks shares in 47 countries, fell 0.1% after gaining 3.5% last month.
Oil prices traded near a three-month high hit on Monday amid signs of tightening global supply. Also buoying prices were producers cutting output and demand in the United States, the world’s biggest fuel consumer, remaining resilient.
Brent crude futures were last down 0.6% at $85.25, losing ground during London trading. Energy giant BP (LON:BP) gained 0.2% and boosted its dividend by 10% after reporting a second-quarter profit of $2.6 billion.
The dollar, meanwhile, hit a three-week high against the yen as investors continued to seek clarity on the Bank of Japan’s recent adjustment to its yield curve control and what that might mean for monetary policy.
MSCI’s broadest index of Asia-Pacific shares inched back toward the high reached Monday, which was its strongest since April last year.
Japan’s Nikkei provided support, gaining 0.9% on the back of a weaker yen.
NARRATIVE TESTS
Signs of a peaking out in European inflation on Monday echoed the narrative in the United States, providing more evidence that the biggest central banks are nearing the end of their tightening cycles.
However, other data points gave cause for caution on prospects for the global economy.
China’s stumbling post-pandemic recovery remained in focus after a surprise contraction in manufacturing in a private-sector survey released Tuesday.
Hong Kong’s Hang Seng turned negative, and was last down 0.8%. An index of mainland Chinese blue chips drooped 0.5%.
“At this point, we remain sceptical that there will be any big-bang stimulus package forthcoming,” said Alec Jin, investment director of Asian equities at abrdn.
The positive U.S. narrative also faces some crucial tests this week, with several closely watched jobs reports due, culminating with monthly payrolls on Friday.
The Australian dollar was set for its sharpest one-day drop in a month, falling 1% to $0.6652 after the Reserve Bank of Australia held interest rates for a second month.
The U.S. dollar index – which measures the currency against six major peers – rose as high as 102.07 for the first time since July 10.
That was aided by a continued retreat in the yen to a three-week low of 142.84 per dollar.
