Global stocks mostly rose on Tuesday, despite investor risk reflected in negative economic data out of China, and analysts warned volatility could be ahead.
European equities gained early in the session. The benchmark in Tokyo ended little changed, while indices in South Korea and Australia gained. Hong Kong’s benchmark slipped, while Shanghai stocks rose.
France’s CAC 40 added 0.4% in early trading to 6,598.28. The German DAX rose 0.6% to 13,904.68. Britain’s FTSE 100 added 0.4% to 7,539.93. US stocks were expected to decline slightly, with Dow futures falling to 33,869.00. S&P 500 futures fell nearly 0.1% to 4,295.00.
Falling oil prices are positive for the region. In Japan, recent economic data has shown a recovery, but high COVID-19 rates are fueling fears that people are holding back on travel and other economic activities.
Some analysts say share prices have not accurately reflected real risks.
“Regardless of the news, there’s just a huge appetite to buy stocks. And to keep buying,” said Clifford Bennett, chief economist at ACY Securities. “Talking about the bottom having already been priced in seems somewhat premature. If the market pulls back again after all this long positioning, it will fall with thunderous impact. Buyers beware.”
The Japanese benchmark Nikkei 225 was little changed and finished at 28,868.91. The South Korean Kospi rose 0.2% to 2,533.52. Australia’s S&P/ASX 200 added 0.6% to 7,105.40. Hong Kong’s Hang Seng reversed course and fell 1.1% to 19,830.52, while the Shanghai Composite gained almost 0.1% to 3,277.88.
Markets reacted overnight to news that China’s central bank had lowered a key interest rate, acknowledging that more needed to be done to shore up its economy. The move is the latest warning to markets already nervous about record inflation and fears of recessions in the United States and elsewhere.
China is the world’s second largest consumer of crude oil, so the news weighed on energy prices. US crude oil prices fell 2.9% on concerns about the global economy and weighed heavily on energy stocks.
In Tuesday’s trading, benchmark U.S. crude fell $1.46 to $87.95 a barrel. Brent, the international standard, fell $1.73 to $93.37.
Global investors are concerned that the US Federal Reserve may apply the brakes too hard and send the economy into recession. Any signal that inflation could peak or decline has helped ease some of these worries.
“Lack of direction is what investors will suffer from until we see clearer signs that inflation is slowing. And that will take time, as we need to see some encouraging data points to qualify the fight against inflation. “Central bank inflation is successful. Lack of clear direction drives markets up and down,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Investors are also closely watching the impact of inflation on businesses and consumers. Spending has slowed and the economy as a whole has already contracted for two consecutive quarters. Several major retailers will give investors more details on how their businesses are holding up when they report earnings this week.
Home Depot and Walmart report results Tuesday, and Target results are due Wednesday. The US Department of Commerce also releases its July retail sales report on Wednesday. Economists polled by FactSet expect modest growth of 0.2% from June, when sales rose 1%.
In currency trading, the US dollar rose slightly to 133.85 Japanese yen from 133.27 yen. The Euro traded at $1.0145, down from $1.0165 previously.