Markets muted ahead of Fed meeting
European stock markets were muted on Tuesday in London, after a day of trading in the red, with gains in the UK led by positive employment numbers.
Across the pond, US stocks opened almost flat ahead of the Federal Reserve meeting minutes release on Wednesday, where it is expected to reinforce its current position. The S&P 500 (^GSPC) and the Dow (^DJI) were trading slightly down by the afternoon in London.
Meanwhile, the tech-weighted Nasdaq (^IXIC) ticked 0.5% higher.
Alongside underwhelming stock market moves, the dollar fell to a three-month low.
“The stimulus and vaccine story is still a valid theme in global markets, but not so much on Wall Street where most of the good news is already baked in and many big names are plagued by bloated valuations,” said Raffi Boyadjian, senior investment analyst at XM.
“That probably explains why the tech sector has been reacting more adversely to the inflation threat. However, with the Fed so far standing firm on tapering even after the latest inflation scares, investors have been able to contain their panic for now.”
Europe’s lacklustre close comes following slightly better employment data from the UK on Tuesday morning. The unemployment rate fell to 4.8% in the three months to March, down from 4.9% in February.
The redundancy rate has also fallen by a record during the quarter and vacancies soared in March. The Office for National Statistics (ONS) said there were “signs of recovery”.
In March, 19% of the workforce was on furlough.
Analysts at Hargreaves Lansdown classified the moves as positive, but said that the UK economy is not out of the woods yet.
“At this stage we can’t be certain of the impact of the Indian variant on transmission, and whether this will put the brakes on the reopening of businesses,” said Sarah Coles, personal finance analyst.
“Overall, in Europe, it is likely that the price action may continue to remain directionless as investors are still not fully convinced that stocks have become cheap,” said Naeem Aslam, chief market analyst at Avatrade.
“The general consensus is that it is likely we will see more weakness in the stock price as traders believe that stock indices have gone too far and too fast.”
Read more: UK jobs market ‘turns corner’ as 100,000 hired ahead of reopening
Asian stocks broadly rose overnight, with Japan’s Nikkei (^N225) gaining 2.1%, having slumped to its lowest level since early January last week.
On Monday, Japan’s wholesale prices jumped 3.6% in April from a year earlier as rising energy and commodities costs ate into corporate margins.
Hang Seng (^HSI) was also up 1.4% and the Shanghai Composite (000001.SS) gained 0.2%.
Investors across the world are weighing the pace of growth as economies take the next steps to reopen.
Watch: What are SPACs?