The world’s stock markets mostly ticked upwards yesterday as investors moved cautiously at the start of a busy week packed with key interest rate decisions, in particular from the US Federal Reserve.
Across Europe, London’s FTSE 100 was down 0.2% at 7,357.31 at close;
Frankfurt’s DAX 30 was down 0.1% at 12,085.82, while Paris’ CAC 40 was up 0.4% at 5,390.95.
The indices in London and Paris closed modestly ahead after Hong Kong stocks rallied, with investors there cheering a decision by the city to suspend plans to push through a controversial extradition law.
The Wall Street also slightly rose as traders took a breather ahead of the G20 summit next week, where US President Donald Trump and his Chinese counterpart Xi Jinping are due to hold hotly-awaited talks on their long-running trade war.
“There isn’t a tonne of conviction in the early going, partly because the market appears to be caught up in a swirl of headlines carrying loose ends,” said Briefing.com analyst Patrick O’Hare.
One of those swirling headlines is the ongoing tension between the US and Iran as yesterday Tehran announced its uranium stockpile will soon pass the limit set under a nuclear deal that Washington abandoned last year.
The news exacerbated an already strained relationship after the US blamed Iran for two tanker attacks in the Gulf of Oman last week, claims that Tehran calls “baseless”.
“Tensions in relation to trade and the Iranian situation still persist, and they are hanging over stock markets,” said analyst David Madden at trading firm CMC Markets UK.
Naeem Aslam at London-based trading firm ThinkMarkets said this week “the focus is going to remain on central banks and their monetary policies”.
“Traders are betting that the Federal Reserve will take a U-turn this year for its monetary policy and it is only a matter of time before we see a rate cut by the Fed,” she added.
The US central bank will unveil its monetary policy announcement tomorrow, followed by both the Bank of Japan and the Bank of England on Thursday.
Many observers are tipping a US rate reduction next month as the world’s biggest economy shows signs of stuttering.
“Anything less than a clear signal that the Fed is open to cutting rates soon in response to building downside risks to the US economic outlook could leave financial markets disappointed,” noted MUFG currency analyst Lee Hardman. “The US rate market is well priced for at least a (quarter-point) rate cut to be delivered by July.”
In Hong Kong, investors returned to buying after three days of losses that saw the Hang Seng drop more than 2% after protests against the law — which would have allowed extradition to China — turned violent.
Another, peaceful, demonstration on Sunday saw around 2mn people take to the streets, according to organisers.
The plan had also spooked business leaders who feared it would damage the city’s reputation as an international business hub.
Traders “will breathe a loud sigh of relief today, as on Wednesday when teargas and rubber bullets were filling the air, the markets were getting extremely jittery that this ticking time bomb was about to explode”, said Stephen Innes, managing partner at Vanguard Markets. “Fortunately, cooler heads prevailed.”
In individual stocks, shares in Sotheby’s auction house soared by more than 57 % after the company announced it would be acquired by French telecoms and media mogul Patrick Drahi.
Facebook shares rose 3.3% as the world’s biggest social network prepares to outline details today of a virtual currency launching next year.
In commodities, oil prices retreated from last week’s gains that followed the tanker attacks in the Gulf.
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