World stocks hit five-week peak, as dollar continues retreat

WASHINGTON/LONDON, Oct 26 (Reuters) – Global stocks hit a five-week high on Wednesday in choppy trade as U.S. stocks were mixed, with investors weighing disappointing earnings from the American heavyweights with the hope that the Federal Reserve will slow down its aggressive rate of interest. tax increases.

The US dollar index fell to a five-week low as the pound hit its highest since September 13, continuing its rally after Rishi Sunak became British prime minister.

News that the British government’s plan to fix the country’s public finances will be delayed by more than two weeks to November 17 pushed up bond yields.

Wall Street was mixed. The Dow Jones Industrial Average (.DJI) rose 0.51%, the S&P 500 (.SPX) lost 0.13% and the Nasdaq Composite (.IXIC) fell 0.97% at 10:37 am EDT ( 1437 GMT)

MSCI’s world share index (.MIWO00000PUS) was up 0.36% and hit a five-week high. Europe’s Stoxx 600 (.STOXX) also hit a five-week high in choppy trade.

Google owner Alphabet ( GOOGL.O ) posted softer-than-expected advertising sales after Tuesday’s close and Microsoft ( MSFT.O ) missed revenue forecasts, while a warning from the Dutch provider of Semiconductor ASM (ASMI.AS) added concerns about slowing economic growth. .

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Some of Europe’s biggest banks have warned of growing risks as the economy fizzles after posting stronger-than-expected profits, helped by a trading boom in volatile markets and higher interest rates. Deutsche Bank ( DBKGn.DE ) posted a better-than-expected jump in third-quarter profit, and Britain’s Barclays ( BARC.L ) also beat profit forecasts.

Asian shares rallied, in a sign that some investors were comforted by a perception that a turn in the global cycle of rate increases may be near.

Although the Fed is widely expected to deliver another 75 basis points in November, the sense that the Fed could then begin to slow its aggressive tightening cycle lifted sentiment in the stock markets and took the lead of a dollar rally.

“I don’t want to take the optimism too far. We think it’s still too early for the Fed to make a significant pivot and the stronger the markets are, the more likely it is that the Fed wants to be more cautious than wanting to make a pivot” , said Andrew Sheets, strategist at Morgan Stanley.

The papers also noted “more downside risk” to earnings.

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Data on Tuesday showed slowing home price growth and soured consumer confidence, with some signs that the Fed’s aggressive rate hikes are starting to cool the labor market.

“It feels like it’s too early to declare the ‘all-clear’ for equity markets – for example, the Fed could still push US real rates further into restrictive territory – which means we’re dealing with this decline in the dollar as corrective,” said Chris. Turner, global head of markets at ING.

Meanwhile, the Bank of Canada announced a smaller than expected rate hike of 50 percentage points. That puts its policy rate at 3.75%, a 14-year high, but that comes shortly after calls for another move of 75 basis points to contain stubbornly high inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rallied more than 1%, while Japan’s Nikkei (.N225) hit its highest level since September 20.

The euro returned above $1 for the first time in five weeks.

In Australia, inflation hit a 32-year high last quarter as the cost of house building and gas rose. The surprise added pressure on the central bank to announce a recent dovish turn, although markets doubt that there will be a dramatic change.

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The Australian dollar rallied more than 1%.

The Chinese yuan rebounded sharply to close the domestic session at the strongest level in two weeks, as traders and corporate clients rushed to liquidate long dollar positions.

Market participants became cautious after major state banks were seen selling the dollar on Tuesday to stabilize the market, traders said.

Investors increased bets on the Bank of England raising its benchmark rate by a full percentage point on November 3 following the news and putting the probability of such a move at around 37%, higher than ‘and before the announcement of the delay.

Gold prices jumped as the dollar and bond yields weakened. Spot prices rose 0.82%.

Elsewhere in commodities, oil prices rose on the weaker dollar and supply problems. US crude rose by $2 per barrel.

Reporting by Dhara Ranasinghe; Additional reporting by Ankur Banerjee in Singapore; Edited by Kim Coghill and David Holmes

Our standards: Thomson Reuters’ principles of trust.

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