The rally in global shares paused Tuesday amid lackluster trading in US and European equity futures. The Australian dollar fluctuated after the nation’s central bank kept interest rates unchanged.
Contracts for the S&P 500 dropped fractionally while those for the Nasdaq 100 edged down by 0.1%. Euro Stoxx 50 futures were little changed. The moves followed marginal gains in the US benchmarks in a shortened session Monday as traders weighed data showing a slowdown in manufacturing.
The Aussie fell as much as 0.5% versus the greenback before retracing the drop. The rate decision from the Reserve Bank of Australia 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 about 0.6%, Hong Kong’s Hang Seng Index swung between gains and losses and South Korean shares fell.
Treasuries weren’t trading Tuesday due to the Independence Day holiday in the US.
The offshore yuan strengthened after the People’s Bank of China extended again its efforts to prop up the currency through its daily reference rate.
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 stocks jumped on expectations that the supply restrictions would fuel massive price rises for the metals, which would outweigh the drop in export volumes, said Li Weiqing, fund manager at JH Investment Management Co.
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.
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.
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 manufacturing sector painted a grim picture as US factory activity fell to its weakest level in more than three years. Production and new orders data also suggested a pullback.
Elsewhere, oil rose as traders assessed the latest salvo from OPEC+ kingpins Saudi Arabia and Russia to prop up prices by curbing supply. Gold ticked higher.
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