NEW YORK (Reuters) - The dollar gained, helped by better-than-expected data in the U.S. non-manufacturing sector, and oil prices retreated on Tuesday as caution kept investors alert for developments in the U.S.-Iranian stand-off in the Middle East.
Gold prices inched higher after backing off an almost seven-year high on Monday, when risk-aversion drove demand. Stocks in Europe mostly edged higher and on Wall Street traded little changed to lower.
A U.S. drone strike in Baghdad on Friday killed Iranian military commander Qassem Soleimani, widely seen as Iran’s second-most powerful figure, in a slaying that threatens to spark regional conflict.
Tehran has vowed retaliation and French President Emmanuel Macron urged Iran to avoid any actions that could worsen Mideast tensions. Germany called for a joint European response to Iran’s decision to scrap limits imposed on its nuclear enrichment program.
MSCI’s gauge of stocks across the globe shed 0.03while the pan-European STOXX 600 index rose 0.25%.
“Earnings and the economy have taken a bit of a back seat relative to the rising tensions in the Mideast and investors are keenly focused on what might happen there next,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
Even amid rising geopolitical tensions, cyclical stocks have outperformed defensive shares, reflecting views that the U.S. economy remains strong and growth will re-accelerate later in the year despite the flare-up in the Middle East, he said.
“The ISM non-manufacturing number was a little bit above expectations. That would support the idea the consumer and cyclicals that benefit from the consumer are the leadership today even in a down market,” Arone said.
