LONDON - Global shares traded cautiously higher on Tuesday, in light of growing evidence of a softening in the US economy ahead of earnings from Nvidia, while the euro eased below the one-month highs that followed Germany's weekend election.
Investors were rattled early on by an order from US President Donald Trump to limit Chinese investments in strategic areas such as chips, AI and aerospace.
Having pushed stocks on both sides of the Atlantic to record highs this month, investors are getting uneasy and Wednesday's results from Nvidia, which has come to characterize the boom in artificial intelligence investment, could prove instrumental in setting the mood for the remainder of the quarter.
In Europe, the STOXX 600 rose 0.2 percent, while the euro steadied around $1.047, having topped $1.05 for the first time in a month on Monday, after Friedrich Merz's opposition conservatives won Germany's national election.
The euro is up around 1 percent so far this year, but is still one of the worst-performing major currencies against the dollar, given its high exposure to the risk of tariffs.
Trump's planned duties on US imports risk pushing up domestic inflation, while his mass firings of government employees could impact the labor market, just when the Federal Reserve needs room to cut interest rates.
Tension between the United States and Europe has also risen over Ukraine and how to broker a ceasefire agreement with Russia.
Sentiment in the markets is fragile, but there has not been much in the way of volatility, Chris Beauchamp, chief strategist at IG, said.
"This is a sharp contrast to the past couple of years where crises seem to come one at a time and then, you could just deal with them when they occurred, and now it seems to be 'everything, everywhere, all at once'," he said.
"There are reasons to be optimistic, I think. If you look at earnings season, it's gone really well. But of course, the headlines and the signs of fracture between Europe and the US - it doesn't directly affect ... stocks, but it just makes sentiment all the more febrile."
Meanwhile, negative surprises in US economic data have accelerated this month, led by unwelcome pickups in things like consumer inflation expectations and, most recently, by a drop in overall business activity.
The futures market shows traders expect the Fed to cut rates by around 50 basis points this year, up from 40 bps a week ago.
US stock futures pared earlier losses on Tuesday to trade unchanged on the day, indicating a steadier start later on Wall Street, where technology stocks tumbled overnight.
Trump also indicated overnight that proposed tariffs on Mexico and Canada were still set to start next week, which nudged the US dollar up marginally against its Canadian counterpart.
Yields on the 10-year Treasury note fell 5 basis points to 4.346 percent, around their lowest for two months.
In commodities, Brent crude futures edged up 0.1 percent to $74.85 a barrel, following fresh US sanctions imposed on Iran, while gold fell 0.4 percent to $2,940 an ounce, having hit a record high of $2,956.15 on Monday.
Bitcoin ran into some profit-taking, falling by as much as 6 percent to below $89,000, as traders continued to process last week's hack of $1.5 billion worth of ether from cryptoexchange Bybit.
