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Global Stocks Waver After Wall Street Notches Fresh Record

Global stocks mostly edged down on Tuesday after Wall Street hit a new high closing, raising questions about how much longer the rally can continue while rising oil prices threaten to push inflation higher.

In Europe, the Stoxx Europe 600 was down 0.1% in morning trading. In Asia, the Shanghai Stock Exchange was up 0.5%, Hong Kong’s Hang Seng Index was down 0.7% and Korea’s Kospi lost 0.6%.

Futures pointed to small opening losses for both the Dow Jones Industrial Average and the S&P 500.

Daniel Morris, senior investment strategist at BNP Paribas Asset Management, pointed to a so-called Goldilocks scenario, where economic fundamentals aren’t too hot and not too cold, with growth above trend, low and stable inflation and minimal volatility across markets.

“You have all three of those conditions in the U.S., whereas growth is arguably below trend in Europe,” he said. “The reason for the return of Goldilocks, though, is the same in both regions: central bank support.”

Investor jitters have calmed since the beginning of the year as the U.S. Federal Reserve turned dovish and the chances of a cliff-edge Brexit have been delayed, though U.S.-China trade tensions have yet to be resolved.

The U.S. Federal Reserve’s rate-setting committee begins its next two-day meeting Tuesday. Analysts at UniCredit saw little chance the central bank will shift its accommodative stance.

“The U.S. central bank is currently in wait-and-see mode, which is characterized by the two buzzwords ‘patience’ and ‘data-dependency,'” the analysts wrote in a recent note.

Market sentiment in recent weeks has also hinged on corporate earnings. On Monday, earnings from Google-parent Alphabet undercut expectations, though that came after a slew of positive results from U.S. technology groups firms including Amazon.com and Facebook.

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

The yield on 10-year U.S. Treasurys ticked down to 2.509% from 2.538% on Monday. German 10-year government bonds rose out of negative territory at 0.003%. Yields move inversely to prices.

In commodities, global benchmark Brent crude oil was up 0.1% at $71.61, capping a series of volatile sessions after President Trump ended waivers on Iranian sanctions. Mr. Trump has also pushed the Organization of the Petroleum Exporting Countries to maintain low prices.

As investors have searched for signals on growth in key economies, statistical releases are in the spotlight. Later Tuesday, fresh data will show how much the eurozone grew in the first quarter. China’s gauge of factory activity showed a sharp drop in April, according to official data published earlier Tuesday.
Source: Dow Jones

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