October 6, 2022

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Stocks Stabilize After Fed Raise, Next BoE Turns

Stocks Stabilize After Fed Raise, Next BoE Turns

A man wearing a protective mask, amid the outbreak of the coronavirus disease (COVID-19), walks through an electronic board displaying stock indices of various countries including the blank Russian Trading System (RTS) index, outside a brokerage in Tokyo, Japan, March 10, 2022. (Reuters) / Kim Kyung-Hoon

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LONDON / TOKYO (Reuters) – European stock markets extended solid gains in Asia on Thursday after China signaled more support for its faltering economy and the Federal Reserve pushed ahead with its first rate hike in US interest rates in more than three years. .

Traders remained in the grips of the devastating war in Ukraine, but hopes that a peace deal could be fading, but they were also alive were watching to see if the Bank of England would raise interest rates in the UK again later as well. Read more

Eurostox 600 (.stoxx) It was 0.1% lower after the initial rally. Earlier it jumped 3.5% by the Nikkei in Tokyo (.N225) Emerging market stocks (MSCIEF) Means the MSCI Global Leading Index (.MIWD00000PUS) It’s still up and over 6% in the past three days, albeit after a solid start to the year.

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The ongoing Russian bombing of Ukraine, which has been devastated by sanctions, has kept commodity markets in high volatility as oil prices return to the token level of $100 again. The Kremlin has attacked US President Joe Biden and called Russian President Vladimir Putin a war criminal, but said he is putting “tremendous energy” into peace talks. Read more

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Metals markets faced more drama after nickel trading was halted again on the London Metal Exchange on Wednesday.

“The reaction this morning and evening is that markets believe the Fed is in line or ahead of the curve and doing the right thing” by raising rates, said Robert Alster, chief investment officer at Close Brothers Asset Management.

He added that it would also be the “right thing” for the Bank of England to raise interest rates later for the third meeting in a row, to return to the pre-pandemic level of 0.75%.

The Bank of England forecast last month that inflation would peak at around 7.25% in April – nearly four times its 2% target – but those forecasts were overtaken by seismic shifts in European energy markets in the wake of Russia’s invasion of Ukraine.

“The crucial point is that we all expect inflation to start to fall after Easter,” Alster added. “But if it doesn’t, maybe we all need to do the reset.”

The stock market’s gains came on the heels of a 2.2% rise in the S&P 500 Index on Wall Street (.SPX) Overnight.

Meanwhile, bond markets have begun to stabilize after Treasury yields soared to their highest levels in nearly three years after the Federal Reserve indicated that it also plans to raise interest rates at each meeting for the remainder of this year to curb inflation aggressively. Read more

The 10-year Treasury was at its latest at 2.12% while the benchmark German 10-year bond yield slipped 2 basis points to 0.382% after starting the day higher, extending the previous session’s gains to 0.408%, its highest since November 2018 DE10YT = RR .

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ING price strategists said in a note to clients that more upbeat sentiment in recent days means there are “fewer excuses for central banks to delay policy tightening”.

High inflation in the UK

Asia height

Despite this, the dollar remained weak in the FX markets. The dollar index, which it measures against six other major currencies, was slightly weaker at 98.476 after also dropping 0.5% on Wednesday.

The dollar showed some strength against the Japanese currency, standing at 118.82 yen, not too far from a more than six-year high of 119.13 reached overnight amid a widening monetary policy gap.

The Bank of Japan is widely seen keeping its broad stimulus in place on Friday as the economy continues to falter. Read more

Meanwhile, concerns about a sharp slowdown in China, which is battling the spreading COVID-19 virus outbreak with highly restrictive measures, eased after Chinese Vice Premier Liu He indicated on Wednesday more stimulus is on the way.

Hong Kong’s Hang Seng Index rose more than 5% overnight, adding a 9% jump on Wednesday. Defeated sectors including technology and real estate surged, with Country Garden Services Holdings (6098.HK) Country Garden Holdings (2007.HK) They climb about 28% and 26%, respectively.

Internet giant Alibaba (9988.HK) Jumped 9%, China’s leading stocks (.CSI300) Gaining 2.3%, extending the previous day’s 4.3% rebound while Japan also saw significant gains, with the Nikkei (.N225) Jumping 3.5% and touching a two-week peak.

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Mark Jones reports. Editing by Toby Chopra

Our criteria: Thomson Reuters Trust Principles.

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