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Global Stocks Post Small Rises

Global stocks posted gentle rises on Tuesday, as U.S. and U.K. investors returned to their desks and weighed developments over the weekend including European elections and continuing concerns about U.S.-China trade.

In Europe, the Stoxx Europe 600 was up 0.1% in opening trading. In Asia, the Shanghai Stock Exchange gained 0.6%, Hong Kong’s Hang Seng Index was up 0.2% and Japan’s Nikkei was up 0.4%.

Futures pointed to opening gains on Wall Street of 0.1% for both the Dow Jones Industrial Average and the S&P 500.

The finance and communications sectors weighed on European markets, as shares in Intesa Sanpaolo dropped 1.4% and UniCredit lost 2.2% amid concerns that tensions between Rome and European leaders in Brussels are set to rise further.

European markets have lagged behind the U.S. for some time. The region, which is relatively exposed to fluctuations in global trade, has faced a series of headwinds in recent months, from trade tensions with the U.S. to the marked slowdown in Chinese growth. Jeff Mueller, high yield portfolio manager at Eaton Vance Management, described the European economy as “weak” and “soggy.”

“I am concerned that the China overhang basically hangs over Europe for longer and I personally don’t believe Europe is able to stand on its own two feet without other big global economies leading it up,” Mr. Mueller said.

Greek government bond yields dropped further on Tuesday, after Prime Minister Alexis Tsipras said he would call a general election. The yield on 10-year debt reached 2.998% on Tuesday.

On Monday, President Trump closed a trip to Japan with soothing comments on both Iran and North Korea. He suggested he did not see North Korea’s latest round of missile tests as having violated international rules and that he is not trying to remove the government in Tehran, despite recent tensions.

The 10-year U.S. Treasury yield on Tuesday ticked down to 2.285%, from 2.327% on Friday, following Monday’s break. Yields move inversely to prices.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was broadly flat.

Investors remained concerned about the health of the world’s largest economy. Erik Nielsen, group chief economist at UniCredit Bank in London said the U.S. is currently in the late stages of the economic cycle but the “natural cooling” of the economy expected at this time has been delayed by looser fiscal policy under the Trump administration and the central bank’s decision to stop raising interest rates.

“Don’t confuse this with an ability to walk on water,” Mr. Nielsen wrote in a recent note to clients, reminding investors that the U.S. cannot avoid a slowdown or even a recession altogether.

This week, investors will be watching for the latest consumer confidence data from the U.S., due on Tuesday, and statistics on personal income, spending and inflation on Friday.

Meanwhile, in the U.K. markets opened broadly flat following a public holiday on Monday. The country’s main political parties suffered stunning blows in the European elections, as the fledgling Brexit Party made a strong showing and the pre-European Liberal Democrats also won a large share of the vote, signaling continued confusion on the path ahead for Brexit.

In commodities, global benchmark Brent crude oil was down 0.5% at $68.45 a barrel. Reports this week suggested buyers for oil from Iran were drying up after President Trump pledged to clamp down on its ban on exports from the country.
Source: Dow Jones

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