European Shares Seen Opening Higher As Yields Drop

European stocks may open a tad higher on Tuesday as long-term Treasury yields ticked lower, easing concerns about rising inflation.

Bank of England Governor Andrew Bailey said an increase in interest rates in financial markets over the last month or so was consistent with the chances of recovery from the Covid recession.

Asian markets followed Wall Street higher and the dollar held firm as investors looked ahead to the latest government debt auctions and a two-day policy meeting of the Federal Reserve starting later today.

The Fed is widely expected to leave interest rates unchanged on Wednesday, but traders will be paying close attention to any changes to the accompanying statement.

Some traders are hoping the Fed will address the recent spike in bond yields, which has led to considerable volatility in Wall Street in recent sessions.

The Bank of England meets on Thursday, while the Bank of Japan wraps up a two-day gathering on Friday.

Gold traded flat while oil extended declines for a third day on concerns about rising stockpiles in the United States.

Economic sentiment figures from Germany and the Eurozone are due later in the session. Across the Atlantic, trading may be impacted by reaction to reports on retail sales, industrial production and homebuilder confidence.

U.S. stocks closed higher overnight amid bets that a faster vaccination rollout and additional government stimulus will boost consumer spending – a powerful driver of overall economic growth, in the second half of the year. A pullback in benchmark Treasury rates also offered some support.

The Dow rose half a percent and the S&P 500 climbed 0.7 percent to reach new record closing highs, while the tech-heavy Nasdaq Composite index rallied 1.1 percent.

European stocks closed mostly lower on Monday as several EU members temporarily halted the use of the AstraZeneca Covid-19 vaccine.

The pan European Stoxx 600 ended on a flat note. The German DAX dropped 0.3 percent, while France’s CAC 40 index and the U.K.’s FTSE 100 both dipped 0.2 percent.

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