Stocks Rally Pauses as Traders Eye Economy, Rates: Markets Wrap

The rally in global shares paused Tuesday as investors turned their attention to risks for the economy and the prospects of further restrictive central bank policy moves.

(Bloomberg) — The rally in global shares paused Tuesday as investors turned their attention to risks for the economy and the prospects of further restrictive central bank policy moves.

In corporate news, J Sainsbury Plc fell after the UK grocer retained its pretax profit forecast following a strong first quarter in a sign of sustained cost pressures. Real estate stocks were the best performers as Europe’s benchmark Stoxx 600 index inched higher. With no cash trading in US equities Tuesday due to the Independence Day holiday, futures contracts on the S&P 500 and the Nasdaq 100 were little changed. 

After a strong first-half for stocks, positioning in parts of the equity market is looking stretched, according to strategists at Citigroup Inc. Positioning in S&P and Nasdaq futures is “very extended” and sits on “moderately large profits,” with the Nikkei the most extended market overall, according to the team led by Chris Montagu. Investors may move to protect these gains in the coming week, considering how far the market has run, they said.

Signs of cooling in the US economy — which are set to influence the trajectory of the Federal Reserve’s monetary-tightening cycle — mean investors are tempering expectations for stocks for the remainder of the year, especially as central banks worldwide have maintained their hawkish rhetoric.

The Australian dollar fluctuated Tuesday after the nation’s central bank kept interest rates unchanged. The Reserve Bank of Australia’s decision had divided both economists and traders on the question of a hike or pause. The yield on the nation’s policy-sensitive three-year bond reversed most of an earlier gain. Australian equities rose. 

“Whilst a pause may come as a relief to some, I doubt we’re at the peak rate, although we may not be far off,” said Matt Simpson, a senior market analyst at City Index in Sydney. At 4.1%, the RBA’s cash rate remains “very low” compared with its peers, he said, adding that the pause simultaneously acknowledged that “inflation is still too high” and wages are expected to rise.

Elsewhere, Japan’s Topix fell and Hong Kong’s Hang Seng Index swung between gains and losses. Shares of Chinese non-ferrous metals firms climbed after the government imposed restrictions on exports of gallium and germanium, which are crucial for the semiconductor, telecommunications and electric-vehicles sectors. 

The export controls showed that China has some power to retaliate against moves by the US, Japan and Europe to cut Beijing off from advanced technology, but this could also accelerate efforts by these countries to reduce dependence on the world’s second-biggest economy.

Treasuries weren’t trading Tuesday due to the holiday in the US. Meanwhile, a key part of the US Treasury yield curve approached its most inverted level in decades on Monday as traders priced in further hikes from the Federal Reserve. Two-year yields exceeded the 10-year by around 111 basis points.

Key events this week:

  • US Independence Day national holiday. Financial markets closed, Tuesday
  • China Caixin services and composite PMI, Wednesday
  • Eurozone S&P Global Eurozone services PMI, PPI, Wednesday
  • OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
  • FOMC issues minutes on June policy meeting, Wednesday
  • New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
  • US initial jobless claims, trade, ISM services, job openings, Thursday
  • Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
  • US unemployment rate, nonfarm payrolls, Friday
  • ECB’s Christine Lagarde addresses an event in France, Friday

Some of the main moves in markets today:


  • The Stoxx Europe 600 was little changed as of 8:26 a.m. London time
  • S&P 500 futures were little changed
  • Nasdaq 100 futures fell 0.1%
  • Futures on the Dow Jones Industrial Average were little changed
  • The MSCI Asia Pacific Index was little changed
  • The MSCI Emerging Markets Index rose 0.3%


  • The Bloomberg Dollar Spot Index fell 0.1%
  • The euro was little changed at $1.0908
  • The Japanese yen rose 0.1% to 144.52 per dollar
  • The offshore yuan rose 0.3% to 7.2276 per dollar
  • The British pound was little changed at $1.2689


  • Bitcoin fell 0.3% to $31,038.76
  • Ether fell 0.2% to $1,955.18


  • The yield on 10-year Treasuries was little changed at 3.85%
  • Germany’s 10-year yield advanced three basis points to 2.47%
  • Britain’s 10-year yield advanced three basis points to 4.47%


  • Brent crude rose 0.9% to $75.29 a barrel
  • Spot gold rose 0.2% to $1,926.11 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, April Ma and Ruth Carson.

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