The Euro STOXX 600 dropped 0.2%, with euro zone blue chip stocks down by a similar amount, while Wall Street was set for a brighter open with S&P 500 futures 0.2% higher and Nasdaq futures adding 0.4%
Global shares were mixed on Tuesday as investors waited to see if U.S. Federal Reserve Chair Jerome Powell would sound supportive of rate reductions after evidence the U.S. labour market is cooling.
The Euro STOXX 600 dropped 0.2%, with euro zone blue chip stocks down by a similar amount. Energy shares, tracking lower oil prices, led the losses, declining 0.9%.
Wall Street, however, was set for a brighter open with S&P 500 futures 0.2% higher and Nasdaq futures adding 0.4%. Wall Street on Monday had gained to end at record high level on Monday.
Powell is set to appear before Congress on Tuesday and Wednesday, as investors speculated a slew of soft labour market data has bolstered the possibility of a rate cut in September to nearly 80%.
The Fed chair’s testimony pushed investor focus away from France, where political deadlock in the euro zone’s second largest economy cooled concerns over the potential fiscal impact of far-left or far-right policies.
The euro swung on Monday, but the currency was on Tuesday stable near a four-week peak.
U.S.-wise, the Fed policy is important but not the only driver, according to Alexandre Marquis, senior portfolio manager at asset manager Unigestion. Corporate earnings, this helps alleviate the disappointing expectations for rate cuts, he added.
Euro zone bond yields also rose ahead of the Powell testimony. Germany’s 10-year bond yield, the benchmark for the euro zone bloc, gained 1 basis point to 2.53%.
The closely watched gap between French and German borrowing costs, which increased to the highest since 2012 in late June at 85 basis points on fears of a far-right victory, held steady at 66 basis points.
France’s hung parliament has reassured markets, Deutsche Bank analysts stated, as “it makes it difficult for any policies to be implemented, with neither the far-left nor the far-right able to implement their programme on these numbers.”
Earlier, Japan’s Nikkei index climbed 1.96%, hitting a record high, supported by semiconductor shares and a battered yen, which boosts the foreign earnings of Japanese firms.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4%, just below a two-year top a day earlier.
