LONDON, May 28 (Reuters) – European shares were a touch softer on Wednesday after Tuesday’s advance, while the dollar was supported by promising signs on the United States’ trade talks and there were hopes earnings from major chipmaker Nvidia (NVDA.O), later in the day could light a rally.
Investors were cautiously optimistic that trade frictions between the U.S. and Europe might be easing, but long-term yields rose again as a lacklustre auction of Japan’s longest-dated bonds underscored lingering fiscal deficit concerns.
U.S. President Donald Trump said on Tuesday that the European Union’s move to set up talks was positive, after he walked back plans to impose 50% tariffs on goods from the bloc.
“They are major trading partners, so I’m optimistic there will be some sort of agreement in the end,” said George Lagarias, chief economist at Forvis Mazars.
Europe’s STOXX 600 (.STOXX), was down 0.2%, having risen over the last two days on the back of Trump’s EU tariff pause. It was still up over 1.3% for the week.
Britain’s FTSE (.FTSE), opens new tab, France’s CAC 40 (.FCHI), and Germany’s DAX (.GDAXI), also slipped around 0.2%, the last after earlier touching another new record.
In the U.S., attention turned to chipmaker Nvidia, the last of the “Magnificent 7” tech companies to report earnings this season.
“There is renewed confidence that Nvidia can beat the consensus estimates,” said Chris Weston, head of research at Pepperstone.
If Nvidia comes through with better-than-expected sales and profit margins “the rally is on”, Weston added.
The chipmaker is expected to report that first-quarter revenue surged 66.2% to $43.28 billion, according to data compiled by LSEG.
Ahead of the results, Nasdaq futures rose 0.2%, while S&P 500 futures were up 0.1%.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), finished little changed. Japan’s Nikkei (.N225), ended flat, after advancing for the previous three sessions.
China’s CSI300 blue-chip index (.CSI300), slipped 0.1%, while Hong Kong’s Hang Seng Index (.HSI), fell 0.6%.
EYES ON BOND YIELDS
A rise in longer-dated bond yields resumed on Wednesday amid rising concerns about fiscal sustainability in many major markets, including the U.S., Japan and Britain.
Those concerns escalated in recent weeks after the U.S. sovereign rating was downgraded by Moody’s and as Trump’s bill for large-scale tax cuts passed in the House, before moving to the Senate.
George Lagarias, chief economist at Forvis Mazars, said investors were worried about “U.S. fiscal incontinence and an apparent repudiation of fiscal discipline.”
He added: “Because they have the global reserve currency, (the U.S.) is testing their ability to borrow as much as they can, but ultimately there is only so much the markets can handle.”
Japanese bond yields rose overnight following tepid demand for an auction of 40-year notes, with the 40-year JGB yield rising 4 basis points to 3.335%. Bond yields move inversely to prices.
That lifted long-end yields across the globe, with the U.S. 30-year yield up 3.5 bps to 4.9748% and the 10-year yield up 3 bps to 4.4654%.
In currency markets, the dollar index , which tracks the U.S. currency against a basket of six peers, was inching 0.1% higher after a 0.6% rally the day before. The euro was flat at $1.1323 .
The kiwi dollar rose 0.3% to $0.5969 after the Reserve Bank of New Zealand cut rates by 25 basis points as expected, but signalled it might be nearer to the end of its current easing cycle than the market had expected.
Oil prices ticked up as the U.S. barred Chevron (CVX.N), from exporting crude from Venezuela under a new authorisation on its assets there, raising the prospect of tighter supply.
Brent crude futures rose 0.8% to $64.59 a barrel, while U.S. crude advanced 0.8% to $61.39 per barrel. Spot gold rose 0.4% after dropping more than 1% on Tuesday.
Reporting by Samuel Indyk in London and Rocky Swift in Tokyo; editing by Jamie Freed, Jason Neely and Sophie Walker
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
AloJapan.com