(Bloomberg) — Stocks in Asia are poised to open steady Tuesday as investors remain cautious about whether central banks can raise interest rates to rein in inflation without derailing growth. Oil gained after the European Union backed a push to ban some Russian oil.
Futures inched lower in Japan, Australia and Hong Kong. US contracts climbed after European equities rose. US markets were closed Monday for the Memorial Day holiday.
Crude oil advanced to around $117 a barrel after EU leaders agreed to pursue a partial ban on Russian oil in response to the invasion of Ukraine.
Higher energy and food costs are keeping upward pressure on prices globally and squeezing consumers. European bonds tumbled after German inflation hit a record, adding to pressure on central bank policy makers to tame rising prices. The dollar slipped for a third day.
In China, purchasing managers indexes for May are likely to show service and manufacturing activity continuing to shrink amid Covid lockdowns, despite progress in containing the virus and resumed production at some Shanghai plants, according to Bloomberg Economics.
Global stocks are on track to end the month with modest gains amid skepticism about whether the market is near a trough and as volatility stays elevated. Fears that central bank rate hikes will induce a recession, stubbornly high inflation and uncertainty around how China will boost its flailing economy are keeping investors watchful.
“The mood is temporarily better in markets,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “I think the worst is over for bond markets but picking the bottom in equities is trickier. Iggo said another 10%-15% drop in equity markets couldn’t be ruled out.
German inflation hit another all-time high, adding urgency to the European Central Bank’s exit from crisis-era stimulus after numbers from Spain also topped economists’ estimates. The reports came 10 days before a crucial ECB meeting where officials are set to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time in more than a decade.
In the US, Federal Reserve Governor Christopher Waller said he wants to keep raising interest rates in half-percentage point steps until inflation is easing back toward the central bank’s goal.
Meanwhile, President Joe Biden will hold a rare Oval office meeting on Tuesday with Fed Chair Jerome Powell amid the highest inflation in decades and ahead of US payroll numbers later this week.
Elsewhere, Bitcoin was back above $30,000 as investors and strategists said the digital currency is showing signs of bottoming out.
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