The move came after Wall Street stocks closed near record levels in the previous session. Investors are watching oil prices, Treasury yields and the latest signals on the US economy as they assess the outlook for stocks. Global stock markets were mostly higher on Tuesday, while US stock futures also gained.
In early European trading, the FTSE 100 in Britain rose 0.8% to 10,584.38. France’s CAC 40 gained 0.8% to 7,892.78. Germany’s DAX also climbed 0.8% to 25,465.56. The S&P 500 futures rose 0.3%, while Dow Jones futures gained 0.6%. Japan’s Nikkei 225 rose 1.1% to 70,683.98. The Nikkei moved above 70,000 for the first time since early July this week. South Korea’s Kospi fell 0.9% to 6,941.39. Hong Kong’s Hang Seng gained 1% to 24,280.56. Australia’s S&P/ASX 200 rose 0.6% to 8,735.70. Taiwan’s Taiex edged up 0.2%, while India’s Sensex gained 0.7%. Japanese chip-testing equipment maker Advantest rose 3.9%. But SoftBank Group fell 3.1% after CEO Masayoshi Son warned about possible dangers from artificial intelligence technology. In South Korea, Samsung Electronics dropped 1.5%, while memory-chip maker SK Hynix fell 3.7%. The S&P 500 rose 0.7% on Monday and ended close to its previous record high. The Dow Jones gained 0.2%. The Nasdaq Composite jumped 1.1% to a new record closing high. Nvidia gained 2.1% on Monday. Broadcom also rose 2.1%. Oil prices declined more than 1% in early Tuesday trading. Brent crude, the international benchmark, fell 1.3% to $99.07 a barrel. This pushed Brent back below the important $100-a-barrel level. However, oil is still much more expensive than it was in late February, when it was around $72 a barrel, according to ABC News. The US national debt has now surpassed $40 trillion. At the same time, the market faces major risks from very high Treasury yields, inflation, the $40 trillion-plus US debt pile and continued Middle East tensions.
US stock futures were also positive. This showed that technology stocks were not moving in the same direction across Asian markets. Strong gains in major technology companies helped push the market higher. Gains in major technology companies have helped support the broader stock market even as investors face concerns about high oil prices and rising bond yields. However, investors are also expecting strong corporate earnings. Those earnings expectations have helped support the recent stock market rally ahead of the latest earnings season. This means investors remain worried that a new disruption could reduce oil supplies from the region and push prices higher again. So, while oil prices are falling now, the market is still sensitive to developments in the Middle East. That concern is keeping oil prices relatively well supported despite Tuesday’s fall. Patterson and Manthey wrote in an ING commentary, as cited by ABC News/AP. The huge debt burden is another issue being watched by investors in the bond market. Higher yields can also make borrowing more expensive for companies. But investors are currently balancing those risks against expectations for strong corporate earnings. That earnings optimism has helped keep stocks near record levels despite the pressure from oil prices and bond yields. For now, strong earnings expectations and gains in major technology stocks are helping investors look past those risks, keeping global equities close to strong levels.
Because of a national holiday, according to ABC News, mainland Chinese markets were closed. Because they can increase costs and borrowing expenses, high oil prices and rising Treasury yields are creating problems for companies. Because tensions between the US and Iran are still high, the situation remains uncertain. Because bonds become more attractive to investors, normally, very high bond yields can put pressure on stocks. Because investors are getting some relief from the fall in oil prices and are still confident about corporate earnings, global stocks are rising.
ING commodities strategists Warren Patterson and Ewa Manthey said there are growing signs that oil flows from the Persian Gulf are recovering. However, they said the market remains nervous about possible supply disruptions from the region. Higher Treasury yields can also increase the cost for the US government to service its debt, according to ABC News.
The 10-year US Treasury yield eased to around 5.27% on Tuesday. It had briefly crossed 5.35%, reaching its highest level since 2002. The decline in oil prices is happening while US Treasury yields remain close to multi-decade highs. Investors want higher returns to hold US government bonds. One reason is rising inflation pressure. Higher energy prices linked to the Iran war have added to those inflation concerns. When investors demand higher returns from Treasury bonds, their yields rise.
US benchmark crude fell 1.7% to $87.91 a barrel. The US dollar rose to 158.18 Japanese yen, compared with 157.91 yen previously. The euro was trading at $1.1238, up from $1.1223.
More oil has been moving through the Strait of Hormuz, an important route for global oil supplies. Because energy costs affect transportation, production and other parts of the economy, lower oil prices can reduce pressure on companies and consumers. Because it changes the value of overseas earnings and trade, a stronger dollar can affect international investors and companies.
Analysts said pressure pushing oil prices higher has started to ease. Oil flows through Saudi Arabia’s key East-West pipeline have also been recovering, according to ABC News.
The fall in oil prices is one reason investors are getting some relief, although prices remain high compared with earlier in the year.
