Global shares mostly rose Tuesday, despite investor risk reflected in negative economic data out of China, and analysts warned that volatility may lie ahead.
European shares gained in early trading. The benchmark in Tokyo finished little changed, while indexes in South Korea and Australia gained. Hong Kong’s benchmark slipped, while Shanghai shares rose.
France’s CAC 40 added 0.4% in early trading to 6,598.28. Germany’s DAX rose 0.6% to 13,904.68. Britain’s FTSE 100 added 0.4% to 7,539.93. U.S. shares were set to drift moderately lower with Dow futures inching down to 33,869.00. S&P 500 futures fell nearly 0.1% to 4,295.00.
Falling oil prices are one positive factor for the region. In Japan, recent economic data have shown a recovery, but high rates of COVID-19 are fueling fears people will hold back on travel and other economic activity.
Some analysts say stock prices haven’t properly reflected real risks.
“It doesn’t seem to matter what the news is, there is just a huge appetite to buy stocks. And to keep buying,” said Clifford Bennett, chief economist at ACY Securities. “Talk of the bottom having already been priced in seems somewhat premature. Should the market turn down again after all this long positioning, it will fall with a thunderous impact. Buyers beware.”
Japan’s benchmark Nikkei 225 was little changed and finished at 28,868.91. South Korea’s Kospi rose 0.2% to 2,533.52. Australia’s S&P/ASX 200 added 0.6% to 7,105.40. Hong Kong’s Hang Seng reversed course and was down 1.1% at 19,830.52, while the Shanghai Composite gained nearly 0.1% to 3,277.88.
Markets reacted to news overnight that China’s central bank cut a key interest rate, acknowledging more needed to be done to shore up its economy. The move is the latest warning for markets already on edge over record-high inflation and fears about recessions in the U.S. and elsewhere.
China is the world’s second-largest consumer of crude oil, so the news weighed on energy prices. U.S. crude oil prices slumped 2.9% on worries about the global economy and weighed heavily on energy stocks.
In Tuesday trading, benchmark U.S. crude fell $1.46 to $87.95 a barrel. Brent crude, the international standard, lost $1.73 to $93.37.
Global investors are worried that the U.S. Federal Reserve could hit the brakes too hard and send the economy into a recession. Any signal that inflation could be peaking or retreating has helped ease some of those worries.
“Lack of direction is what investors will be suffering until we see clearer signs of inflation abating. And that will take time, as we must see a couple of encouraging data points to call the central banks’ inflation fight successful. The lack of clear direction is driving the markets up and down,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Investors are also keeping a close watch on how inflation is affecting businesses and consumers. Spending has slowed and the broader economy has already contracted for two straight quarters. Several big retailers will give investors more detail on how their businesses are holding up when they report earnings this week.
Home Depot and Walmart report their results on Tuesday, and Target’s results are due on Wednesday. The U.S. Commerce Department also releases its July retail sales report on Wednesday. Economists surveyed by FactSet expect modest 0.2% growth from June, when sales rose 1%.
In currency trading, the U.S. dollar edged up to 133.85 Japanese yen from 133.27 yen. The euro cost $1.0145, down from $1.0165.