Tuesday 16:00 GMT.
Worries over whether Athens and its creditors can reach a bond restructuring agreement is again hobbling the recent impetus of the growth-focused asset rally.
But the euro has reversed an early decline and is up 0.8 per cent to $1.3240, an eight-week high, after traders got excited by reports that Greece was drafting a bailout agreement that would be put to political leaders later in the day. The news also helped stocks pull off their lows.
The FTSE All-World equity index, which by the end of last week had bounced almost 9 per cent in 2012, is up fractionally on the session.
The FTSE Eurofirst 300 opened flat, but is now down 0.5 per cent, as another batch of corporate earnings – such as those of UBS – receive a generally lacklustre response from investors. Wall Street’s S&P 500 is lower by 0.1 per cent shortly after the bell, but well off its lows.
“The rally in risky assets has gone a long way, with global equities soaring by more than 18 per cent from the October lows,” said Barclays Capital in a note to clients.
The recent surge, Barclays added, “can be explained by a combination of easy money in G10; reduced risks in Europe; resilient global growth; and extreme pessimism/short positioning in the second half of 2011”.
Still, despite the euro’s firm showing on Tuesday, markets are nervous as Greece endures another day of strike action, with traders concerned that the brinkmanship between the government and the holders of its debt risk a “messy” default that could reignite eurozone sovereign contagion fears.
Bunds were initially benefiting from the tension, with 10-year yields dipping 2 basis points to 1.88 per cent. But sellers have emerged, pushing yields up 5bp to 1.96 per cent. Meanwhile, Italian benchmark yields are up 5 basis points to 5.67 per cent, but remain close to three-month lows.
Many aspects of the market’s risk profile have turned more positive. The dollar index, which tends to go down when traders are more optimistic, is losing 0.5 per cent. And US bond yields, which usually go up at such times, are higher by 5 basis point to 1.95 per cent ahead of a busy week of Treasury auctions.
A total of $32bn of three-year paper is up for sale on Tuesday and investors will also be paying attention to Federal Reserve chairman Ben Bernanke who is testifying before the Senate on the economic outlook.
There is great debate whether gold is a risk asset or a haven, but, either way, the metal is welcoming the fall in the dollar and is up 0.8 per cent to $1,733 an ounce, halting to a two-day, $40 slide.
Indecision can be seen in commodities, however. Copper is down 0.5 per cent to $3.85 a pound, while concerns about supplies, as the Syrian crisis escalates and the standoff between Iran and the west continues, leaves Brent crude up 0.2 per cent to $116.12 a barrel.
A decision by the Reserve Bank of Australia to leave monetary policy unchanged could be taken by some as a positive sign. The market had expected the RBA to ease interest rates from 4.25 per cent. But the Aussie dollar jumped to a six-month high above $1.08, after the central bank said it thought growth would be close to trend, a positive view of global economic prospects.
Australian stocks were not too impressed, however. After initial gains, the S&P/ASX 200 ended down 0.5 per cent, as investors expressed disappointment that no rate cut was forthcoming, with consumer-focused equities and property groups bearing the brunt.
Elsewhere in Asia, trading was mixed, with Shanghai off 1.7 per cent, Tokyo down 0.1 per cent, but Seoul was up 0.4 per cent as some shippers in the region made gains after the Baltic Dry Index, a barometer of shipping demand, ended a 33-session losing streak.
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