Wall Street stocks kicked off June on an upbeat note, following a turbulent month for global equity markets.
The broad S&P 500 index rose 0.4 per cent, having ended May effectively flat after weeks of sharp swings driven by debate about US inflation and the direction of monetary policy.
The technology-heavy Nasdaq Composite rose 1.1 per cent in early dealings.
Still, some analysts warned of further falls to come. Nicholas Colas, co-founder of DataTrek Research, pointed to Wall Street analysts trimming their forecast for S&P earnings as a sign of more trouble for equities. “It’s hard to expect stocks to rally when analysts are cutting estimates,” he wrote in a note.
In Europe, the regional Stoxx 600 share gauge struggled for direction on Wednesday, while London’s FTSE 100 traded flat.
“When we look at various historical episodes, we think equities have not found the trough yet, given headwinds of further aggressive tightening from central banks, the risk related to the war in Ukraine, which is clearly systemic, and commodity markets performing strongly,” said Anna Stupnytska, global economist at Aviva Investors.
Fresh data on Wednesday stoked concerns about slowing growth in Europe, after German retail sales slid more than expected in April — falling 5.4 per cent month on month compared with expectations of a 0.2 per cent decline.
Questions about how far central banks will raise interest rates also intensified after eurozone consumer price growth hit a record high in May, figures showed on Tuesday, with concerns about inflation stoked further by EU leaders agreeing a ban on most Russian oil imports.
Investors would be watching corporate earnings closely in the months ahead to monitor which businesses can weather inflationary pressures, said Roger Lee, head of UK equity strategy at Investec.
“Every company generally claims they have pricing power. Proving it will be interesting and critical for equity investments,” Lee added, juxtaposing US retailer Target’s profit warning with the performance of British bootmaker Dr Martens on Wednesday. The London-listed group’s shares rose more than 25 per cent after it raised its guidance for the next financial year.
In Asian equity markets, Hong Kong’s Hang Seng fell 0.6 per cent as investors weighed the easing of coronavirus restrictions in Shanghai following two months of lockdown against growth concerns. A privately compiled gauge from Caixin showed that activity in China’s manufacturing sector had contracted for a third consecutive month.
Government bonds steadied following a bout of selling in the previous session. The US Federal Reserve was due to begin the process of quantitative tightening on Wednesday, reducing its balance sheet by allowing some of its existing bonds to mature without replacing them.
The yield on the 10-year US Treasury note was also steady at 2.85 per cent, while the more policy-sensitive two-year yield rose 0.04 percentage points. The yield on Germany’s 10-year Bund, seen as a proxy for borrowing costs in the bloc, was flat on Wednesday at 1.12 per cent.
