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Chart: Global Wealth Development http://tmsnrt.rs/2yaDPgn
Graphic: World exchange rates http://tmsnrt.rs/2egbfVh
By Dhara Ranasinghe and Elizabeth Howcroft
LONDON, Oct 5 (Reuters) – World stocks held on to two-week highs on Wednesday, although another aggressive rate hike from New Zealand dampened the notion that central banks could be about to slow the pace of rapid monetary tightening to slow down.
Oil prices rose ahead of an OPEC+ producers’ meeting to discuss a big cut in crude production after rising more than 3% in the previous session.
Asian equities rallied, but European equity markets fell and US stock futures indicated a weak start for Wall Street.
The S&P 500 index posted its biggest one-day rally in two years on Tuesday after weaker US economic data and a lower-than-expected rate hike from Australia raised hopes of less aggressive tightening by the Federal Reserve.
US 10-year Treasury yields, which move inversely with prices, are down 12 basis points this week as hopes of a slowdown in rapid Fed tightening took hold.
However, a more cautious tone emerged on Wednesday as a sharp rise in interest rates in New Zealand dampened hopes of a pause or slowdown in other major central banks’ aggressive rate hikes.
“There is a growing sense that the market may be hasty in believing that inflation has peaked and central banks will begin to ease their hawkish stance,” said Stuart Cole, head macro economist at Equiti Capital.
“Until we see a material fall in CPI, I think central banks will remain in their hawkish mode and will be willing to accept weak growth – ie a mild recession – if that’s the price to pay to break the inflationary spirit to get back in the bottle,” he added.
European stocks fell, sending the region’s STOXX 600 index down 0.9% by 1114 GMT after rising 5% in the previous three sessions. S&P 500 futures fell 0.8%.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan rose 2.4%, catching up on Wall Street’s strong gains during the previous session.
With that, MSCI’s World Stock Index was up about 0.1% after peaking for about two weeks before the session.
WAITING FOR OPEC+
Investors were eagerly awaiting a crucial OPEC+ supply decision later Wednesday, which could have global implications for already high energy prices and inflation.
After strong gains the previous day, US crude was up 0.6% to $87.08 a barrel and Brent crude was up 0.7% to $92.43 a barrel.
According to a Reuters report, OPEC+, which includes Russia and Saudi Arabia, could cut between 1 and 2 million barrels a day.
US Treasury yields rose again and the dollar stabilized after suffering its worst setback in more than two years on Tuesday. The benchmark 10-year Treasury yield was 6.6 basis points higher at 3.6828%.
The dollar was up 0.2% to 144.4 yen, while the euro was about 0.7% weaker at $0.9920 after gaining 1.7% on Tuesday, the biggest one-day percentage gain since March means.
“Although European assets are recovering quite strongly, it is difficult to point to a material change in the euro-zone outlook that would justify a significant return in markets’ appetite for the euro even now,” said ING currency strategist Francesco Pesole.
Elsewhere, spot gold was trading at around $1,709 an ounce, down around 1%.
(Reporting by Dhara Ranasinghe and Elizabeth Howcroft; Additional reporting by Danilo Masoni; Editing by Toby Chopra and Alexander Smith)