Global Markets Face Uncertainty as Chinese Rally Pauses and Middle East Tensions Rise
As the week draws to a close, investors are bracing for a potential decline in European stocks, mirroring the weakness seen in Asian equities. The pause in China’s remarkable rally has sparked profit-taking, while concerns over escalating tensions in the Middle East are driving up oil prices.
Futures on the Euro Stoxx 50 index dropped 0.4%, while US shares fell 0.2%. In Hong Kong, a gauge of Chinese shares plummeted 1.6%, snapping a 13-day winning streak. Meanwhile, Japanese shares rose on a weak yen, as markets in mainland China remain closed for the Golden Week holiday.
The pound weakened after Bank of England Governor Andrew Bailey hinted at the possibility of more aggressive interest-rate cuts. According to Charu Chanana, global markets strategist at Saxo Markets, “markets are taking a breather as the stimulus momentum has stalled with China away on holiday.”
European traders are also grappling with rising headwinds, including a proposed temporary tax on France’s largest companies. In the US, prosecutors are broadening their probe into potential price-fixing by German software maker SAP SE and tech reseller Carahsoft Technology Corp.
Japan’s Topix index surged over 1% after the country’s new prime minister, Shigeru Ishiba, indicated that the economy is not ready for another interest-rate increase. The yen slipped 0.2% to 146.78 per dollar, while the dollar gained strength following stronger-than-expected ADP jobs data.
As investors await Friday’s nonfarm payroll data, global equities are on track for their first weekly loss in four weeks. The lingering threat of geopolitical tensions in the Middle East and speculation over the pace of the Fed’s monetary policy easing are weighing on markets.
Oil prices rose as investors awaited Israel’s response to Iran’s missile attack, with US President Joe Biden urging restraint. The Bloomberg dollar index gained for a fourth day, buoyed by rising Treasury yields. The US 10-year yield rose to 3.79% in Asian trade, while the euro fell 0.2% to $1.1028.
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