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Tokyo - A global rally picked up speed as Chinese shares steadied after a selloff and North Korean artillery drills did little to ruffle financial markets. The yen weakened with gold.
European shares extended gains after surging to a 20-month high in the previous session in the wake of French elections. Stocks in Japan and Hong Kong led equities higher in Asia. Volatility continued to melt away as Shanghai stocks climbed from a three-month low on speculation concerns of a regulatory crackdown were overdone. The euro and French bonds extended their advance.
Global stocks surged to an all-time high on Monday as Emmanuel Macron advanced as the favourite in the presidential runoff, easing concerns that France will leave the euro currency bloc.
With worries over China and North Korea also in check for the moment, traders are turning their attention to a raft of other potential market-moving events, including corporate earnings and US President Donald Trump’s agenda for the world’s largest economy.
“The uplift in risk appetite had been the result of a single event, but this week carries with itself a multitude of factors to look out for,” said Jingyi Pan, a market strategist in Singapore at IG Asia.
“The second half of the week certainly brings President Donald Trump back to the stage as he presents both opportunities, in the form of his tax package, and risk, should his push for the border wall drive the US government to a shutdown.”
Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% when he unveils his plan on Wednesday, according to a White House official.
At the same time, the administration appeared ready to go to the mat for its planned Mexican border wall in this week’s must-pass spending bill, setting up a clash with Democrats that may make a government shutdown at week’s end more likely.
While investors shrugged off North Korea’s largest-ever live-firing drill on Tuesday to mark the 85th anniversary of the Korean People’s Army, the situation remains tense. Trump warned of imminent action to contain North Korea’s nuclear threats, while Chinese President Xi Jinping called for restraint in a phone call with the US president.
Other events that may move markets this week:
Alphabet, Microsoft, Amazon.com, Twitter, Intel, Credit Suisse, Barclays, Bayer, Daimler and Total are among major companies releasing results this week. The Bank of Japan is widely expected to keep the settings on its monetary easing program unchanged at the end of a two-day policy meeting on Thursday.
Though inflation remains well below the central bank’s 2% target, it’s ticking up. The European Central Bank sets monetary policy later that same day.
With officials indicating little chance of a policy change, the focus will be on any signals from President Mario Draghi that the ECB is starting to discuss an exit from its extraordinary stimulus. US GDP is due at the end of the week. It’s projected to show the economy expanded at a 1.0% annualised rate in the first quarter, the weakest pace in a year.
Here are the main market moves:
Stocks
The Stoxx Europe 600 Index added 0.1% as of 09:16. The gauge jumped 2.1% to the highest since August 2015 on Monday. Japan’s Topix and South Korea’s Kospi each rose 1.1%. Taiwan’s Taiex jumped 1.3% and the Philippines benchmark soared 1.7%. Australia and New Zealand were closed for Anzac Day. The Shanghai Composite rose 0.2%.
The index tumbled 1.4% on Monday, the most since December 12, falling below its 200-day moving average for the first time since late September. Hong Kong’s Hang Seng rallied 1.2%, with a volatility gauge for the index briefly falling to the lowest level in two years.
The Hang Seng China Enterprises Index jumped 1.7%, the most in a month. Futures on the S&P 500 added 0.2%. The index climbed 1.1% on Monday to within 1% of its all-time closing high.
Currencies
The euro rose 0.1% to $1.0879, trading near the highest level in five months, after its biggest advance since June on Monday. The yen fell 0.4% to 110.23 per dollar. The currency dropped 0.6% in the previous session.
The Bloomberg Dollar Spot Index was little changed, after slipping 0.5% on Monday. Malaysia’s ringgit climbed 0.7%, the most since October, as it caught up with emerging-markets peers following a Monday holiday. The Canadian dollar dropped 0.4% to the lowest level of the year as Trump intensified a trade dispute with Canada, slapping tariffs of up to 24% on imported softwood lumber.
Bonds
US bonds headed for a fifth day of declines, with yields on 10-year Treasuries climbing one basis point to 2.29% after rising three basis points on Monday. The yield on French 10-year notes dropped one basis point to 0.82%, after tumbling 11 basis points in the previous session. German benchmark yields added two basis points to 0.34%.
Commodities
Gold lost 0.4% to $1 271.81 after slipping 0.6% on Monday. Oil advanced 0.1% to $49.30, rebounding from six straight days of losses before US government data that’s forecast to show crude stockpiles fell for a third week.
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