Global stocks hover below record highs ahead of US inflation data, while oil falls for a 2nd day as demand optimism fades

Global stocks mostly edged lower on Tuesday as investors remained focussed on inflation data, with the US consumer price index report due on Thursday.

Futures on the Dow Jones, S&P 500, and Nasdaq fell 0.1%, indicating a slightly lower start to trading later in the day.

The S&P index was still less than a quarter of a percent away from its all-time closing high a month ago, Deutsche Bank strategists said.

Biotech stocks added 1.13% to the Nasdaq the previous day, driven primarily by a record 38% jump in Biogen’s closing price after the company received FDA approval for its new drug to threat Alzheimer’s.

The growth rate of weekly COVID-19 cases is currently at its slowest since mid-March, according to Deutsche Bank. Cases in the US are rising at their slowest pace since March 2020, while India reported fewer than 100,000 daily cases for the first time in over two months. Numbers in the UK, however, have jumped 53% compared to last week, as the Delta variant spreads.

“While we remain alert to inflation risks, we believe the backdrop remains benign for stocks – with benefits most obvious for cyclical parts of the market, including energy and financials,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said.

Separately, lower commodity prices weighed on European stocks with basic resources declining 1.6% and energy down 0.25%, while auto stocks rose 0.8% and consumer products added 0.7%.

London’s FTSE 100 rose 0.2%, the Euro Stoxx 50 rose 0.0.7%, and Frankfurt’s DAX fell 0.1%.

Bitcoin traded 9% lower on Tuesday, while ethereum and dogecoin dropped more than 10%. The main cause behind this most recent crypto sell-off is unclear, but one theory suggests that US federal officials recovering a majority of the ransom Colonial Pipeline paid to a hacker group shows the digital asset can still come under official control.

President Joe Biden is expected to discuss cryptocurrencies at the G7 summit in the UK’s coastal county of Cornwall this weekend.

“Cryptos face an existential threat from major economies regulating or banning them,” said Jeffrey Halley, a senior market analyst at OANDA. “China has started, and the wolves are circling. The Colonial Pipeline saga was a case of flying too close to the sun. Attacks on critical infrastructure will not go unnoticed by important and powerful people.”

Asian equities mostly traded flat or lower. “In general, commodity-related sectors like materials and energy are leading the underperformance,” Deutsche Bank said.

The Shanghai Composite fell 0.5%, Tokyo’s Nikkei fell 0.2%, and Hong Kong’s Hang Seng fell 0.1%.

Oil prices retreated from highs as Brent crude fell 0.7% to $70.96, and West Texas Intermediate fell 0.6% to $68.75 per barrel.

“The price action has all the hallmarks of a very long speculative market getting nervous at the highs and is not indicative of an overall change in sentiment for energy,” Halley said.

“With some improvement in the pandemic situation in India and the recovery in the US, China and Europe remaining on track, oil should remain a buy on dips, with no warning signs coming from the technical momentum indicators,” he said.

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