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Global shares pause near records
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Hopes for bumper tech earnings underpin equity gains
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Bond bulls see rate cuts in US, Canada and a hold in
Japan, euro
zone
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Gold below $4,000/oz as hot money leaves the bubble
(Updates for early European afternoon trading)
By Samuel Indyk and Wayne Cole
LONDON, Oct 28 (Reuters) - Global shares paused their
rally on Tuesday after recent hefty gains as expectations for a
thawing in global trade tensions kept risk appetite keen, while
the bull run in tech stocks counted on a bumper round of
mega-cap earnings this week.
The likelihood of lower borrowing costs in the U.S. and
Canada this week supported bonds and kept the dollar pinned as
investors waited to see just how dovish the Federal Reserve
might be on the outlook.
Safe-haven gold, meanwhile, fell back below $4,000 an
ounce as a drop of almost 10% in six sessions squeezed leveraged
money out of what were very crowded trades.
"There is a fundamental reason why gold has gone up and that
is mostly demand from central banks," said George Lagarias,
chief economist at Forvis Mazars.
"What we're seeing is a very natural and, dare I say,
welcome correction. The market needs to cool off and proceed at
a more natural pace," he added.
STOCKS PAUSE AFTER RECORDS
Several global share markets that have recently surged to
all-time highs took a breather on Tuesday.
Europe's STOXX 600 was down 0.2% after hitting a
lifetime high on Monday. Major bourses in Frankfurt and
Paris were close to unchanged on the day, while
Britain's FTSE 100 edged up to a new peak.
Spain's IBEX also inched up to touch a new record,
surpassing its previous peak at the onset of the financial
crisis in 2007.
S&P 500 futures and Nasdaq futures were a
touch higher heading towards the Wall Street open.
"Investors are moving with a little more caution on Tuesday
as there are significant risk events ahead, including the FOMC
meeting and the start of the MAG7 earnings reports," said
Daniela Hathorn, senior market analyst at Capital.com.
"The outlook for equities is going to depend largely on how
these factors interact, with a confirmation from the Fed of
future cuts and a positive guidance outlook from the MAG7 as the
ideal scenario for more upside."
There are lofty expectations for the "Magnificent Seven"
tech heavyweights reporting this week, with Microsoft ( MSFT ),
Alphabet, Apple ( AAPL ), Amazon ( AMZN ) and Meta
Platforms ( META ) all needing strong results to justify
stretched valuations.
Japan's Nikkei eased 0.6%, having surged 2.5% on
Monday as a rally in all things tech lifted it to gains of
almost 27% so far this year.
Japan's new Prime Minister Sanae Takaichi met U.S. President
Donald Trump in Tokyo to discuss defence ties, trade and a
package of investments in the U.S. under a $550 billion deal
struck earlier this year.
MSCI's broadest index of Asia-Pacific shares outside Japan
edged down 0.6%, while Chinese blue chips
slipped 0.2%. The Shanghai Composite Index
cracked the 4,000 level for the first time since mid-2015,
although it closed below.
FED TO CUT RATES
In bond markets, 10-year Treasury yields fell to
3.99% as investors await Wednesday's Fed meeting. A
quarter-point rate cut is considered a done deal, with the real
focus on whether the Fed validates market pricing for a December
easing as well.
"It is a given that we see a rate cut," Forvis Mazars's
Lagarias said.
"The questions for me are: will the Fed signal its
intentions for December and will we see further dissent towards
lower rates apart from Stephen Miran?"
There are also some expectations the Fed will end the
rundown of its balance sheet, otherwise known as quantitative
tightening.
Canada's central bank is also expected to cut rates this
week, while the European Central Bank and the Bank of Japan are
seen holding steady.
The BOJ is likely to debate whether conditions are right to
resume rate hikes as worries about a tariff-induced recession
ease, but political complications may keep it on hold for now.
The yen strengthened as U.S. Treasury Secretary Scott
Bessent called for "sound monetary policy" during a meeting with
Japanese counterpart Satsuki Katayama. The dollar was last down
0.5% to 152.11 yen, having stopped short of the recent
153.29 peak on Monday.
The euro nudged up to $1.1652. The dollar index
eased to 98.74, but remained well within the recent
trading range.
In commodity markets, oil prices eased on a Reuters report
that eight OPEC+ nations are leaning towards making another
modest increase in oil output for December when they meet on
Sunday, as Saudi Arabia pushes to reclaim market share.
Brent dropped 1.2% to $64.83 a barrel, while U.S.
crude eased 1.1% to $60.61 per barrel.