Strong US earnings boost global equities amid inflation and geopolitical concerns
WASHINGTON, Jan 28 (Reuters) – Global stock markets posted gains on Friday at the end of a tumultuous week dominated by concerns over the Federal Reserve’s monetary policy and geopolitical tensions between Russia and the West.
Strong earnings from Apple and other tech companies supported US markets during the session, but major indices remained on track for a weekly decline, as did the pan-European STOXX 600 index (.STOXX) , down 1.02% on the day for a fourth week. losses.EU
Economic reports helped ease inflation fears.
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“The widely watched employment cost index was a little weaker than expected, suggesting that wages could start to cool down from here,” said Stephanie Roth, senior economist at JP Morgan Private Bank.
“Strong wage growth has been a key driver of the Fed’s pivot, so if that trend continues, it would relieve some pressure.”
MSCI’s 50-country main world index (.MIWD00000PUS) gained 0.50% but remained on the brink of its worst January since the 2008 global financial crisis after losing around $7 trillion in value.
The dollar, meanwhile, consolidated its gains and was on course for its biggest weekly gain in seven months against other major currencies as markets priced in a year ahead of aggressive US rate hikes. US/FRX interest.
“The big problem is the Fed, which is clearly in a tightening cycle. Financial market support is not on the central bank’s agenda,” said Tim Ghriskey, senior portfolio strategist at Ingalls. & Snyder in New York.
“The only question is whether the markets have fully digested the advice of (Fed Chairman Jerome) Powell in his press conference… I would expect equity and bond markets to reach highs. trough at some point quite quickly,” he added.
The Fed signaled on Wednesday that it would likely raise rates in March, as widely expected, and reaffirmed its intention to end its pandemic-era bond purchases that month before launching a significant cut. of its assets.
On Wall Street, the Dow Jones Industrial Average (.DJI) rose 0.43% and the S&P 500 (.SPX) gained 1.00%. The Nasdaq Composite (.IXIC) added 1.52%.
The prospect of faster or bigger US interest rate hikes and a possible withdrawal of stimulus pushed the dollar index up 0.014%, while the euro gained 0.05%.
In bond markets, the yield on benchmark 10-year Treasuries fell 2.1 basis points to 1.787%, the Fed’s favorite inflation gauge, the personal consumption expenditure price index. (PCE), having not increased more than expected.
In the 12 months to December, the PCE rose 5.8%. This was the strongest gain since 1982 and followed a 5.7% year-on-year increase in November. Read more
The two-year US Treasury yield, which generally moves in line with interest rate expectations, fell 2.2 basis points to 1.170%, after starting the year around 0.75% .
The British pound hit a nearly 23-month high against the euro as investors expect the Bank of England to hike rates next week and follow a path of rapid monetary tightening in 2022.
Investors also cheered Thursday night’s approval by the U.S. Securities and Exchange Commission (SEC) of the nation’s 17th stock exchange, a subsidiary of Boston-based BOX Exchange, which will incorporate blockchain technology.
The new exchange, named BSTX, aims to launch in the second quarter and will initially trade in securities, such as stocks or exchange-traded funds, first listed on its exchange, but those securities would be traded on rival exchanges.
Investors were digesting a European Union document that showed EU-based foreign banks may need to hold more capital and liquidity under rule revisions being considered by bloc member states.
In Italy, bond yields rose as its parliament struggled to elect a new president.
Oil prices hit seven-year highs on inflation data and as geopolitical tensions continue to raise fears that the Ukraine crisis could disrupt energy markets.
US President Joe Biden and his EU counterpart Ursula von der Leyen pledged to cooperate to ensure Europe’s and Ukraine’s energy security amid the stalemate sparked by the Russian troop rally at the Ukrainian border. Read more
U.S. crude rose 0.12% to $86.71 a barrel and Brent to $89.92, up 0.65% on the day.
Investors cautiously start buying U.S. crude when prices fall given supply disruptions from rising geopolitical tensions, said Tatsufumi Okoshi, senior economist at Nomura Securities.
“The market expects supply to remain tight as OPEC+ is expected to maintain the current policy of gradually increasing production,” he said.
The market is focused on a February 2 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies, a group known as OPEC+. It is likely to stick to a planned increase in its oil production target for March, several sources at the group told Reuters. Read more
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Additional reporting by Marc Jones and Rowena Edwards in London Editing by Jonathan Oatis, Kirsten Donovan
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