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

WASHINGTON/LONDON, Oct 26 (Reuters) – Global stocks hit five-week highs on Wednesday as U.S. stocks were mixed, with investors eyeing earnings from U.S. heavyweights on hopes the Federal Reserve will ease its aggressive interest rates. rate increase.

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

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

Wall Street is 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 a.m. EDT (1437 GMT)

The MSCI world stock index ( .MIWO00000PUS ) rose 0.36% to a five-week high. Europe’s Stoxx 600 (.STOXX) hit another five-week high.

Google owner Alphabet ( GOOGL.O ) reported softer-than-expected ad sales after Tuesday’s close and Microsoft ( MSFT.O ) missed earnings forecasts, while Dutch semiconductor supplier ASM ( ASMI.AS ) warned of slowing economic growth. raised concerns. .

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

Asian shares rose in a sign that some investors are taking comfort in the notion that a turning point in global rate hikes may be nearing.

Although the Fed is expected to hike another 75 basis points in November, sentiment that the Fed may then begin to ease its aggressive tightening cycle lifted sentiment in equity markets and sent the dollar higher.

“I don’t want to take the optimism too far. We think it’s too early for the Fed to make a significant turn, and if markets are stronger, the Fed wants to be cautious. A turn,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley.

Sheets also noted “more downside risk” to earnings.

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Data on Tuesday showed a slowdown in home price growth and weakening consumer confidence, suggesting that the Fed’s aggressive rate hikes are starting to cool the labor market.

“It seems too early to declare the ‘all clear’ for equity markets, ie the Fed could push US real rates deeper into cap territory – so we’re treating the dollar as a bearish corrective,” Chris said. Turner, global head of markets at ING.

The Bank of Canada, meanwhile, announced a smaller-than-expected rate hike of 50 percentage points. That left its policy rate at 3.75%, a 14-year high, but fell short of calls for another 75 basis points to contain stubbornly high inflation.

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

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

Inflation hits 32-year high in Australia as house building and gas prices rise. The surprise has put pressure on the central bank to reverse a recent dovish turn, but markets are skeptical of a dramatic reversal.

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The Aussie dollar rose more than 1%.

China’s yuan rose sharply to close the domestic session at its strongest level in two weeks, as traders and corporate clients raced to liquidate long dollar positions.

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

Investors increased their bets on raising the Bank of England’s benchmark rate by a full percentage point on November 3 after the news, and put the possibility of such a move at around 37%, higher than the delayed announcement.

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

Elsewhere, oil prices rose due to a weaker dollar and supply concerns. A barrel of American oil rose by 2 dollars.

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

Our standards: Thomson Reuters Trust Principles.

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