A look at the day ahead in U.S. and global markets from Mike

Dolan

Tech-led Wall Street stocks have sailed to new records again

this week, with Tuesday expected to see retail sales return to

growth and as nervy European markets calmed for a second day.

The relentless outperformance of U.S. tech megacaps on the

artificial intelligence theme now has the Nasdaq nearing

20% gains for the year to date, outstripping the S&P500

by more than 4% - while the equal-weighted S&P index

is only up a relatively meagre 3.3% for 2024.

The buoyancy of the wider economy, however, is expected to

be underscored later on Tuesday as retail and industry updates

for May are expected to show activity expanding again after a

flat April.

The New York Fed's 'Empire State' business survey on Monday

also showed an improvement this month - even as prices paid by

firms and employment readings eased back.

The picture supports the Federal Reserve's indication of

just one interest rate cut this year - and futures markets are

scaling back their expectations of two moves, with pricing of

full-year Fed easing ticking down to 44 basis points.

"If all of it happens to be as forecasted, I think one rate

cut would be appropriate by year's end," Philadelphia Fed

President Patrick Harker said on Monday.

A torrent of Fed speakers fill today's diary and will reveal

whether Harker's colleagues tally with that take.

With a 20-year bond auction due on Tuesday, U.S. Treasury

yields have firmed up again as a result - giving back more of

last week's slide on encouraging May disinflation news. Ten-year

yields nudged back above 4.30% earlier and the

dollar firmed again.

Part of the reversal of Treasury yields may be down to a

calming of sovereign debt tensions in the euro zone, with French

government yield premia easing back for the second

day and euro zone equities ticking higher.

Although nominal French debt yields rose only modestly after

last week's shock snap election announcement, the spread over

Germany widened to the highest since 2017 amid a dash for

relative safety in German bunds.

But as French election campaign got underway ahead of the

first round of assembly elections on June 30, there's more of a

'wait and see' mood this week as the myriad of potential

outcomes get assessed and the European Central Bank's reaction

function was eyed.

Still-punchy euro zone wage growth has elicited a more

cautious ECB stance about when a second rate cut may come this

year.

But while the ECB played down any possible direct action to

stabilise its bond markets, economists have pointed to the risk

that a sizeable hit to French banks' stock prices due to the

political uncertainty could have knock-on bank credit growth and

build pressure for more easing rather than bond intervention per

se.

CAUTIOUS CENTRAL BANKING TONE

Stocks in Asia were higher, meantime, helped largely by the

tech-related ebullience around the world.

But the cautious global central banking tone was evident

around the region.

The Reserve Bank of Australia left its key interest rates at

a 12-year high of 4.35% for a fifth straight meeting, but

emphasised the need to be vigilant on inflation.

In a hawkish twist, the central bank said it debated whether

to raise interest rates again at the meeting. A rate cut there

is now not fully priced until April or May next year.

The Australian dollar, however, held steady.

Dollar/yen, meantime, continued to nudge higher even as Bank

of Japan Governor Kazuo Ueda said the central bank could raise

interest rates next month depending on economic data available

at the time.

Back on Wall St, AI-infused Apple ( AAPL ), Nvidia ( NVDA )

and Microsoft ( MSFT ) continued to jockey for the role of the

world's most valuable company.

In individual company news, Apple ( AAPL ) said late on Monday said

it will discontinue its "buy now, pay later" service in the

United States as it launches a new loan program.

Users will be able to access instalment loans offered

through credit, debit cards and lenders when checking out with

Apple Pay, starting later this year, the company said in a

statement.

On the other side of the spectrum, U.S. electric vehicle

maker Fisker filed for bankruptcy protection, looking to sell

its assets and restructure its debt, after succumbing to rapid

cash burn to deliver its "Ocean" SUVs in the United States and

Europe.

Key developments that should provide more direction to U.S.

markets later on Tuesday:

* US May retail sales, May industrial production, April

business/retail inventories, April TIC data on Treasury holdings

* Federal Reserve Board Governor Adriana Kugler, Fed Governor

Lisa Cook, Boston Fed President Susan Collins, Dallas Fed chief

Lorie Logan, St. Louis Fed boss Alberto Musalem, Richmond Fed

President Thomas Barkin and Chicago Fed chief Austan Goolsbee

all speak

* U.S. Treasury auctions 20-year bonds

(Editing by Bernadette Baum)