European shares inched towards four-month highs yesterday, as an easing of pressure on Italy’s debt markets coincided with China’s latest move to open up its giant economy to the rest of the world.
A pause in the dollar’s recent rally also meant respite for some battered emerging markets – though still not Turkey – while signs of better US and China trade relations had Wall Street futures pointing higher.
Early European trading saw Italian government bond yields come off 14-month highs, after six days of heavy selling on concerns over high-spending policies mooted by a potential new ruling coalition.
The proposed tie-up of the anti-establishment 5-Star Movement and the far-right League has pushed Rome’s 10-year yields up nearly 70 basis points since the start of the month. And plenty of questions remain.
Europe’s big carmakers Volkswagen, BMW and Daimler jumped 1 to 1.6 per cent too, after China said it would cut import duty on passenger cars and car parts from July 1.
Shares of Ford, General Motors and electric car maker Tesla were up between 0.8 per cent and 2.4 per cent in pre-US market trading.
In Asia overnight, Japan’s Nikkei had ended 0.2 per cent lower and Australian shares fell 0.7 per cent.
Chinese stocks also finished in the red, with the blue-chip CSI300 off 0.4 per cent.
Analysts said investors in the region were worried about the growth outlook, with the US Federal Reserve's plans to increase its interest rates pushing up global borrowing costs.
A total of three hikes is almost fully priced-in by the market for 2018 although some investors expect the Fed to be more aggressive. The US central bank will publish minutes of its May 2 meeting, when it held rates steady, later this week.
Emerging market stocks snapped a three-day losing streak and many of the more beaten-down currencies, such as the South African rand, Mexican peso and Indian rupee, pulled out of their recent dives as the dollar eased back.
Meanwhile, oil prices bobbed just under highs last seen in 2014 after Venezuela’s weekend presidential election heightened persistent worries about falls in global oil output.
The market is bracing for the possibility of additional United States sanctions on the country following President Nicolas Maduro’s re-election.
US crude added 31 cents to $72.55 per barrel and Brent rose 52 cents to $79.73.