Brent crude futures climbed over $3.00 to $86.36 a barrel, its highest level since mid-June.
European shares opened lower as escalating U.S.-Iran tensions spooked investors, scrutinizing quarterly earnings from companies such as oil major BP and telecom equipment maker Ericsson to gauge the conflict’s impact on corporate health.
Following a volatile trading session in Asia, MSCI’s broadest index of world shares edged into the negative as Europe opened lower.
Markets were also rattled by on Monday from Federal Reserve Governor Christopher Waller, who said the U.S. central bank may need to raise interest rates “in the near term” if data shows inflation continuing well above the 2% target.
“Markets enter Tuesday at an important inflection point as investors balance three competing forces: renewed geopolitical tensions in the Middle East, the start of the second-quarter earnings season, and June U.S. inflation data,” said Bruno Schneller, managing partner at Zurich-based Erlen Capital Management.
“These events are likely to determine whether the recent rally broadens further or becomes more selective,” he added.
U.S. CPI data is due for release later on Tuesday, followed by comments from Fed Chair Kevin Warsh, who will deliver the central bank’s semi-annual monetary policy report to Congress.
That data will help shape expectations for the Fed’s next meeting on July 28 to 29. Markets currently see around a 40% chance of a 25 basis point rate hike.
The rate-sensitive U.S. 2-year Treasury yield was last at 4.29%, its highest since February, and up 2 basis points on the day.
The yield on the U.S. 10-year Treasury was up 2 basis points at 4.63%.
BOOMING TRADE
Chinese shares surged in earlier trading after export and import data for June released on Tuesday surpassed economists’ expectations. They closed 2.15% higher South Korean shares rose 0.7%. Stocks in Taiwan fell 1.42% on the day.
“China’s exports and imports surged to the highest levels since the pandemic-skewed 2021, as the tech boom supports growth on both fronts,” ING analysts wrote in a research note.
Overnight, stocks on Wall Street sold off. The S&P 500 closed 0.8% lower and the Nasdaq Composite fell 1.6%. S&P 500 futures ticked 0.1% lower in early European trading while Nasdaq futures remained a resilient 0.3% higher.
The U.S. dollar index, which measures the greenback’s strength against a basket of six currencies, nudged 0.1% lower to 101.16, trading around its highest levels of the month. Gold was up 0.5% at $4,020.34.
In Tokyo, the Nikkei 225 closed around 0.7% higher after Finance Minister Satsuki Katayama said Japan may consider adjusting the strategy of the giant Government Pension Investment Fund if the investment environment changed sharply, without giving further detail.
REUTERS
