Gold prices nailed another historic peak Tuesday over the growing prospect of interest rate cuts later this year, while European equity markets wobbled as traders returned following the long Easter holiday weekend.
The haven precious metal advanced as high as $2,266.85 per ounce in morning London deals to extend its blistering record-breaking run, driven also by geopolitical tensions in Europe and the Middle East.
Oil extended Monday’s gains as traders fretted also over supplies and Israel’s war against Hamas in Gaza.
Gold is “pushing sharply higher as we move within two months of the expected June kick-off for European Central Bank, Bank of England, and Federal Reserve easing”, said Scope Markets analyst Joshua Mahony.
Many of the world’s major central banks are tilting toward cutting interest rates as inflationary pressures subside somewhat.
City Index analyst Matthew Weller noted that the price of gold tends to move inversely with interest rates.
“When interest rates fall, gold becomes relatively more attractive compared with fixed income assets such as bonds, which offer weaker returns in a lower interest rate environment,” noted Weller.
– Europe stocks waver –
In equities trading, London and Paris climbed but Frankfurt lapsed into negative territory in subdued deals following the Easter shutdown.
All three main stock markets were closed on Friday and Monday for the long holiday weekend.
In Asia, Hong Kong stocks rallied as Asian traders also returned from an extended weekend break to forecast-beating Chinese factory data that lifted hopes for the world’s number-two economy, though other Asian markets were mixed.
A stronger-than-expected reading on U.S. manufacturing and prices paid kept sentiment in check and sparked questions about the Fed’s timeline for cutting interest rates.
Focus is now turning to the release of U.S. jobs figures at the end of the week, which could have a bearing on the central bank’s decision-making in light of a recent batch of above-par inflation readings.
Hong Kong’s stock market was the star performer, piling on more than two percent on the first day of trading since Thursday as investors cheered data showing China’s manufacturing grew more than forecast last month.
Wall Street ended Monday mixed after the Institute for Supply Management’s gauge of factory activity showed expansion for the first time in March, after 16 straight months of contraction.
But more concerning for investors were figures showing that prices paid hit their highest mark since July 2022, which fanned worries that inflation could start to creep back up and complicate the Fed’s plans to cut rates.
Markets are now pricing in about 65 basis points of cuts this year, lower than the Fed’s guidance of 75 points.
– Key figures around 1040 GMT –
London – FTSE 100: UP 0.3 percent at 7,977.10 points
Paris – CAC 40: UP 0.1 at 8,213.17
Frankfurt – DAX: DOWN 0.1 percent at 18,466.25
EURO STOXX 50: UP 0.3 percent at 5,096.76
Tokyo – Nikkei 225: UP 0.1 percent at 39,838.91 (close)
Hong Kong – Hang Seng Index: UP 2.4 percent at 16,931.52 (close)
Shanghai – Composite: DOWN 0.1 percent at 3,074.96 (close)
New York – Dow: DOWN 0.6 percent at 39,566.85 (close)
Dollar/yen: UP at 151.69 yen from 151.65 yen on Monday
Euro/dollar: DOWN at $1.0740 from $1.0746
Pound/dollar: UP at $1.2566 from $1.2552
Euro/pound: DOWN at 85.47 pence from 85.59 pence
Brent North Sea Crude: UP 1.6 percent at $88.84 per barrel
West Texas Intermediate: UP 1.8 percent at $82.24 per barrel
