By Stella Qiu and Alun John
SYDNEY/LONDON (Reuters) -World shares nudged higher on Wednesday as traders bought after recent falls on soft U.S. data and worries about tariffs, while benchmark U.S. Treasury yields edged up from one-month lows.
Europe’s broad STOXX 600 index was only marginally higher but most Asian benchmarks rose earlier in the day, and S&P 500 futures were up 0.2%.
The health of the U.S. economy is one major focus for markets, and Wall Street closed lower on Tuesday after data showed services sector activity unexpectedly flatlined in July.
That reinforced the message from Friday’s soft jobs data, which caused markets to significantly increase bets on the Federal Reserve cutting rates in September.
“There’s this tug of war going on between the more concrete signs that we have seen that the U.S. economy is slowing and the fact that rate cuts are coming which removes some of the pressure on valuations,” said Samy Chaar, chief economist at Lombard Odier.
Traders are also choosing the positive message from the current situation with U.S. tariffs.
“The market is more focused on the fact that we’re not getting maximalist tariffs, but I wonder if it isn’t focusing enough on the fact that we are still getting something moderate, and more could be coming, pharmaceuticals for example,” Chaar said.
U.S. President Donald Trump on Tuesday said he would announce tariffs on semiconductors and chips in the next week or so, while the U.S. would initially impose a “small tariff” on pharmaceutical imports before increasing it substantially in a year or two.
He said the U.S. was close to a trade deal with China and he would meet his Chinese counterpart Xi Jinping before the end of the year if an agreement was struck.
However, he threatened to further raise tariffs on goods from India over its Russian oil purchases.
Tech and semiconductors were a theme of the day regardless of tariffs. Shares of AI server maker Super Micro fell 17.2% in premarket trading after it missed fourth-quarter estimates, while chip firm Advanced Micro Devices dropped 5.5%. [.N]
Chip foundry giant TSMC shares fell 2%.
Overall, the picture from earnings was a positive one. The S&P500 is on track for 10% earnings per share growth in the quarter, on HSBC’s calculations, while earnings for Europe’s Stoxx 600 are up 4% year on year, on Deutsche Bank’s, better than expected.
In the government bond market, Treasury yields edged up after a $58 billion auction of three-year notes went poorly, but still hovered near multi-month lows. More supply will hit the market this week, with $42 billion in 10-year notes on Wednesday and $25 billion in 30-year bonds on Thursday. [US/]
Two-year Treasury yields rose 1 basis point to 3.73%, having risen 3.5 bps overnight, while benchmark 10-year yields ticked up 4 bps to 4.23%.
Fed funds futures imply a 94% chance of a rate cut next month, with at least two cuts priced in for this year, according to the CME’s FedWatch.
Investors are waiting for Trump’s pick to fill a coming vacancy on the Fed board of governors. Trump said the decision will be made soon, while ruling out Treasury Secretary Scott Bessent as a contender to replace current chief Jerome Powell, whose term ends in May 2026.
With European yields rising slightly less than Treasuries’, European currencies gained. The euro was 0.3% higher at $1.1606 sterling was 0.16% higher at $1.3322. [FRX/]
Oil prices rose after four sessions of declines. U.S. crude was up 1.67% to $66.24 per barrel, while Brent was at $68.77, up 1.69%. [O/R]
Trump said on Tuesday he would decide on whether to sanction countries that purchase Russian oil after a meeting with Russian officials scheduled for Wednesday.
Spot gold prices slipped 0.5% to $3,362 an ounce.
(Reporting by Stella Qiu in Sydney and Alun John in London; Editing by Mark Potter and Bernadette Baum)
