Market Analysis

Global stocks edged higher on Tuesday amid cautious optimism in Europe, awaiting comments from several U.S. Federal Reserve officials. The Australian dollar strengthened after the country's central bank held interest rates steady, citing concerns about inflation.

In Europe, the STOXX 600 index rose 0.2%, with French stocks stable and the spread between German and French bonds narrowing. Last week's sell-off in French assets, triggered by political uncertainties following President Emmanuel Macron's parliamentary election call, showed signs of stabilizing.

Lee Hardman, senior FX strategist at MUFG, noted the market's adjustment following recent volatility in French government bonds, influenced by comments from far-right leader Marine Le Pen indicating respect for institutions. Despite this, ongoing political risks are expected to keep the euro under pressure ahead of the elections.

The euro slipped slightly against the dollar to $1.0722 but gained against the pound. The yield spread between French and German 10-year bonds narrowed to 72 basis points after hitting a recent high last Friday.

In French markets, Carrefour shares fell sharply on reports of potential hefty fines related to its franchise network management. Asian shares advanced following Wall Street's gains on Monday, supporting MSCI's world share index near last week's record highs.

Economist Jameson Coombs of Westpac highlighted optimism over economic resilience, strong corporate earnings, and possible interest rate cuts, which have bolstered equities beyond concerns of a tech stock-driven rally.

U.S. futures for the S&P 500 and Nasdaq were flat. The Reserve Bank of Australia maintained its 4.35% interest rate, underscoring inflation risks but offering no clear guidance on future monetary policy. The Australian dollar held steady at $0.6609 amid uncertainties highlighted in the RBA's statement.

Central banks in Norway, Britain, and Switzerland are set to meet this week, with expectations for unchanged rates in Norway and Britain and a potential rate cut by the Swiss National Bank.

In the U.S., six Federal Reserve speakers are scheduled to provide further insights into interest rate decisions following last week's policy announcement. Market expectations indicate potential rate cuts totaling 45 basis points by the end of 2024.

Later in the day, U.S. retail sales data and a steady 10-year treasury yield at 4.29% were in focus. The dollar strengthened against the euro, British pound, and Japanese yen, while oil prices declined slightly with Brent crude futures at $83.87 per barrel. Gold prices dipped to $2,312 an ounce.

Paraphrasing text from "Reuters" all rights reserved by the original author.