By Nigel Stephenson
(Australian Associated Press)
European shares are on the up, shrugging off losses in Asia, while the dollar has regained its footing as investors seek clues to the interest rate outlook following weak US data.
As European markets reopened after a four-day Easter break on Tuesday, oil dipped below $US40 a barrel with US crude stockpiles forecast to hit record levels.
This, signalling continued low levels of inflation, helped push low-risk government bond yields down.
But the focus was on Fed chief Janet Yellen, who was due to speak before the Economic Club of New York at 1530 GMT.
Weaker-than-expected US consumer spending data on Monday prompted analysts to suggest the US central bank would be cautious about raising rates this year.
Fed policymakers earlier this month projected two rises in 2016, with some saying the first could come next month.
“After the optimistic comments we had from other Fed officials in the recent past, we expect Yellen to be more balanced compared to a very dovish Fed statement,” said Yujiro Gato, currency strategist at Nomura.
“Clearly that will be a driver for the dollar today.”
The pan-European Eurofirst 300 stock index rose 0.6 per cent, with insurers among the gainers after positive broker comments.
The index is down some 8 per cent in 2016 after a turbulent quarter on financial markets triggered by concern over the health of the Chinese economy, uncertainty over US rates and sharp fluctuations in the price of oil and other commodities.
Britain’s FTSE 100 index added 0.8 per cent,
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4 per cent.
Australian shares finished about 1.6 per cent lower while Tokyo’s Nikkei closed 0.2 per cent lower as the week US data rattled sentiment towards exporters.
China’s blue-chip CSI300 index closed down 1.1 per cent and the Shanghai Composite Index lost 1.3 per cent.
The dollar, which slipped on Monday on the soft data, rose 0.2 per cent against a basket of currencies.
Morgan Stanley said its positioning data showed the market was its most short dollars since June.
The euro fell 0.1 per cent to $1.1178 while the Japanese yen fell 0.2 per cent to 113.62.
Speculation of more monetary stimulus and talk that Japanese Prime Minister Shinzo Abe might delay an unpopular sales tax hike and call a snap election kept the yen under pressure, though Abe insisted on Tuesday neither option was planned.
Brent crude oil dropped 62 cents to $US39.65. A preliminary Reuters survey of analysts showed US oil stockpiles measured by the American Petroleum Institute were expected to reach record highs.
Oil prices are up 50 per cent from 12-year lows around $27 touched in January but the rally has eased in recent days.
“Given the absence of economic numbers supporting increases in demand we continue to go sideways,” said Jonathan Barratt at Ayers Alliance in Sydney.
Cheap oil has helped depress global inflation.
In the euro zone, long-term expectations for price rises stand at 1.44 per cent, way below the European Central Bank’s inflation target of just under 2 per cent.
Yields on German 10-year government bonds fell 3.3 basis points to 0.16 per cent.
Gold dipped but held above a one-month low hit on Monday as the weak US data dented prospects of an immediate US rate hike. The metal traded at $1,216.70 an ounce.