Asian shares gained on Tuesday, taking heart from Nasdaq’s fresh high, while gold prices took back some lost ground after plunging more than 4 percent to five-year lows in the previous session.
Financial spreadbetters predicted Britain’s FTSE 100 .FTSE to open about 12 points higher, or up 0.2 percent; Germany’s DAX .GDAXI to gain 18 points, or 0.2 percent; and France’s CAC 40 .FCHI to open flat.
“European equities are set to drift higher tracking overnight gains in the U.S. and Asia,” Jonathan Sudaria, a dealer at Capital Spreads, said in a note.
“Despite the positive start this morning, there’s not a lot of conviction in the move higher. Maybe it’s because we’ve had such a rapid rally since the start of July that the bulls need a breather, or that equities valuations are starting to look a little toppy,” he added.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was last up about 0.4 percent, after wavering between positive and negative territory for much of early trading.
China stocks .SSEC extended gains as government rescue measures appear to have restored some stability to trading.
Japan’s Nikkei share index .N225 ended up 0.9 percent as markets reopened after a public holiday on Monday, reaching a nearly four-week highs on growing expectations for strong first-quarter earnings.
“Although companies won’t likely change their full-year forecasts this time,” investors are keen to see business plans are on track, said Masayuki Kubota, chief strategist at Rakuten Securities. “Most of them expect to confirm that companies’ earnings are resilient.”
Spot gold XAU= added about 0.5 percent on the day to $1,102.40 an ounce, after what traders described as a mini flash crash in the previous session.
The rout caused concern on Wall Street and kept U.S. share gains in check, though all three major indexes posted modest rises and the Nasdaq Composite .IXIC still managed to mark its third straight record close. The S&P 500 .SPX ended less than 3 points from its record close on May 21.
“The decline in gold prices is consistent with the drop in the VIX and the rise in equities that took the Nasdaq to a record high,” Kathy Lien, managing director at BK Asset Management said in a note to clients.
“It signals to FX traders that there is a sense of calm in the markets,” she said.
Part of that calm is due to a more stable situation in Greece, where banks reopened as Athens began the process of paying off billions of euros owed to international creditors after it agreed to a new reform plan in exchange for another bailout to keep it in the euro zone.
Investors also have less incentive to hold gold, as the dollar strengthens ahead of an expected increase in U.S. interest rates later this year, the first in nearly a decade.
Underpinning the greenback, St. Louis Fed President James Bullard told Fox Business Network that there was a better than 50 percent chance that the U.S. central bank will raise interest rates in September.
The dollar jumped to its highest since April 23 against a basket of major currencies .DXY, and was last up about 0.1 percent on the day at 98.111.
The euro edged down slightly on the day to $1.0815 EUR=EBS, after dipping to its lowest since mid-April overnight.
The dollar added about 0.1 percent against the yen to buy 124.43 JPY=EBS after earlier touching a six-week peak of 124.48 yen.
In other commodities trading, crude oil futures continued to slip, pressured by the strengthening dollar and concerns about a supply glut.
U.S. August crude CLc1, set to expire later on Tuesday, was down about 0.4 percent at $49.95 a barrel, back under the $50 threshold after it tumbled below it for the first time since April on Monday.
Brent LCOc1 slipped 0.2 percent to $56.52.