LONDON (UK) – European shares paused on Tuesday as investors were on a quest to evaluate the bond market’s next move, while weak German retail sales were a clear indicator of COVID-19 fallout, which has continued on its biggest economy.
Overnight slump in Asian stockmarkets, after a senior Chinese official expressed apprehensions about the risk of asset bubbles in foreign markets, and a drop in oil prices also affected its sentiment, however, the dollar was steady, along with US Treasuries.
Analysts said a pause was likely after European shares saw their best day in nearly four months on Monday when bond markets became steady from a sharp selloff last week.
“We are in the yield waiting room to see whether central bankers push back this week on the ambivalence we saw last week about interest rates,” said Michael Hewson, chief market analyst at CMC Markets.
“Potentially that was a mistake, giving the impression that the US did not really care about sharp rises in yields and sending the wrong message.”
The pan-European STOXX 600 share index inched 0.2% higher, with Paris down, while Frankfurt and London carving put slim gains.
Investors will scrutinise speeches from US Federal Reserve officials, starting with Lael Brainard at 1800 GMT on Tuesday.
European Central Bank vice president Luis de Guindos said the ECB is flexible enough to counter any undesired rise in bond yields, thereby helping to calm down the German bund in early trading.
“We will have to see whether this increase in nominal yields will have a negative impact on financing conditions,” de Guindos told Portuguese newspaper Público in comments published on Tuesday.
Among the day’s economic data, German retail sales also saw itself tumbling down more than expected in January as an ongoing lockdown to fight the coronavirus pandemic hindered retail spending.
US stock futures were weaker.
Shares in mainland China and Hong Kong came down after a top regulatory official expressed concerns about the risk of bubbles erupting in foreign markets.
Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, told a news conference, “Financial markets are trading at high levels in Europe, the US and other developed countries, which runs counter to the real economy,”
Chinese blue-chips slipped 1.3% while Hong Kong’s Hang Seng Index lost 1.2%.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.33%. Japan’s Nikkei was down 0.8% as some investors secured profits, when it comes to defensive energy and utility shares ahead of the end of the fiscal year this month.
US stocks also climbed overnight, with the S&P 500 posting its best day in nearly nine months, as bond markets saw a breather after a month-long selloff.
Bitcoin fell 1% to $49,135 after rising nearly 7% on Monday.
The US dollar index was up 0.3% against an array of currencies to stand at 91.32.
A stronger greenback weighed on gold, with the yellow metal at $1,719.74 an ounce, down 0.2%.
Oil prices kept swaying over expectations that OPEC would agree to ramp up oil supply at a meeting this week. Brent crude dropped 68 cents, or 1.05%, to $63.01 a barrel. US West Texas Intermediate (WTI) crude saw a dip to 58 cents, or 0.9%, to $60.05 a barrel.
