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Dollar higher, shares bask near peaks

·2-min read

Markets have been in consolidation mode, with world stocks hovering just off record highs, the US dollar lifted by upcoming inflation data and the main volatility gauges looking reassuringly calm.

There was some pressure on sterling as the UK government considered whether to delay removing most of its remaining coronavirus restrictions by two weeks, but it looked like being temporary at worst.

London's FTSE was up 0.2 per cent on Tuesday in line with the pan European STOXX 600. MSCI's 50-country world index was flush to its latest record high and Wall Street futures were steady after its tech titans shrugged off global plans at the weekend to tax them more.

In the bond markets, government bond yields were edging lower before a policy meeting of the European Central Bank (ECB) and US inflation data, both due on Thursday.

Recent comments have suggested the ECB has no plans to start reeling in its mass stimulus program soon, while the US May consumer price index print will be closely watched before a Federal Reserve meeting next week.

"The consensus ahead of the ECB meeting has pretty much settled on the view that the Governing Council will keep the faster pace of asset purchases via the pandemic emergency purchase program for another quarter," ING analysts said.

But they also acknowledged that "the bar for a dovish surprise has been set high".

The US dollar looked to have found some support again after being sapped by last week's softer-than-expected payrolls data.

The dollar's index against a basket of six major currencies stood at 90.136, up 0.2 per cent on the day and off the 89.533 4 1/2-month low touched late last month. It has been idling around there while investors try to gauge the US recovery and policy response.

Sterling, meanwhile, was down 0.3 per cent on the uncertainty over COVID-19 restrictions removal. The British government had planned to lift almost all remaining restrictions but has seen case numbers start to rise again over the last couple of weeks.

Overnight in Asia, Tokyo's Nikkei 225 had inched down 0.2 per cent as losses in market heavyweights offset gains for drugmakers after Eisai Co's Alzheimer drug had received US regulatory approval.

China's benchmark CSI300 Index dropped 0.9 per cent weighed down by lofty valuations and Sino-US tensions. Australia's S&P/ASX 200 was the only major index remaining in positive territory, closing up 0.15 per cent.

Among the main commodities, oil prices lost ground as lingering concerns about the fragile state of the global recovery were heightened by data showing China's oil imports fell in May.

Brent crude widened losses in London to sit at $US70.87 a barrel, off 0.9 per cent. US oil was down by 53 cents, or 0.7 per cent, at $US68.76 a barrel.

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