World mar­kets climb on Fed un­cer­tainty

Kuwait Times - - BUSINESS - LONDON:

World stocks forged higher yes­ter­day on un­cer­tainty over the fu­ture path for US in­ter­est rate hikes, while London shrugged off news of surg­ing in­fla­tion. Asian in­dices ad­vanced as in­vestors weighed the prospect of a US rate in­crease, and on the eve of key eco­nomic growth data in pow­er­house econ­omy China.

In Europe, the FTSE 100 in­dex of lead­ing Bri­tish shares was up 1 per­cent at 7,018 while Ger­many’s DAX rose 1.2 per­cent at 10,632. The CAC-40 in France was 1.3 per­cent higher at 4,507. US stocks were poised for a solid open­ing, with Dow fu­tures and the broader S&P 500 fu­tures up 0.5 per­cent.

There are a num­ber of events over the rest of the week that could im­pinge on in­vestor sen­ti­ment. Par­tic­u­larly in­ter­est­ing to traders will be third-quar­ter growth data out of China to­day. Wor­ries over the Chi­nese econ­omy have sur­faced on sev­eral oc­ca­sions this year to keep sen­ti­ment in check. An­nual growth is ex­pected to be steady at 6.7 per­cent. Any­thing sub­stan­tially be­low that could prompt some jit­ters and be re­flected across fi­nan­cial as­sets.

“Mar­kets ap­pear op­ti­mistic go­ing into risk events in­clud­ing tonight’s China GDP growth up­date, to­day’s fi­nal Trump vs Clin­ton de­bate and to­mor­row’s ECB pol­icy de­ci­sion,” said Mike van Dulken, head of re­search at Ac­cendo Mar­kets.

The main fo­cus of at­ten­tion later in the day will be the re­lease of US in­fla­tion data for Septem­ber. The con­sen­sus in the mar­kets is that the head­line rate edged higher to 1.5 per­cent, while the core rate, which strips out volatile items such as food and en­ergy, held steady at 2.3 per­cent. The dol­lar’s near-term for­tunes could hinge on whether those num­bers are higher or lower than an­tic­i­pated. A higher num­ber will likely ce­ment ex­pec­ta­tions that the Fed­eral Re­serve will raise in­ter­est rates again this year, and that could give the dol­lar a boost. Any­thing lower could have the op­po­site ef­fect.

In Europe, Frankfurt, London and Paris eq­ui­ties also pushed higher, as the fal­ter­ing dol­lar lifted the en­ergy and min­ing sec­tors, deal­ers said. “Eq­ui­ties are point­ing north again to­day, buoyed by Fed rate hike un­cer­tainty tak­ing the dol­lar from its highs,” said Mike van Dulken, head of re­search at trad­ing firm Ac­cendo Mar­kets.

“This, along with... UK in­fla­tion data, is help­ing ma­te­ri­als prices-no­tably Brent crude oil hold­ing above $51 — and thus en­ergy/min­ers,” he said. Bri­tish an­nual in­fla­tion surged to a near two-year high of 1.0 per­cent in Septem­ber, of­fi­cial data showed yes­ter­day, as a tum­bling pound raised prices of im­ported goods and at­tracted tourists.

ECB pol­icy

Mean­while a weaker green­back makes dol­lar-priced com­modi­ties cheaper for buy­ers us­ing stronger cur­ren­cies, which boosts de­mand and prices. In turn, that translates into ris­ing rev­enues, prof­its and share prices for the broader re­sources sec­tor. The gains came amid un­ease over this week’s key events that also in­clude the last US pres­i­den­tial de­bate and a Euro­pean Cen­tral Bank mon­e­tary pol­icy meet­ing.

Wall Street pulled back on Mon­day, de­spite bet­ter-than-ex­pected earn­ings result from Bank of Amer­ica. A be­low-par read­ing Mon­day on man­u­fac­tur­ing in New York off­set news that over­all fac­tory production grew for the third time in four months.

While in­vestors glob­ally ex­pect US in­ter­est rates will rise by the end of the year, the fig­ures tem­pered ex­pec­ta­tions about the pace of rises after De­cem­ber. Fed Vice Chair­man Stan­ley Fis­cher said in­ter­est rates would likely be sup­pressed by sev­eral fac­tors, in­clud­ing weak eco­nomic growth at home and abroad and low cor­po­rate in­vest­ment.

The news added to down­ward pres­sure on the dol­lar, which fell against the yen, euro and even the pound in New York. And while it edged back against the yen on Tuesday, it continued to strug­gle against the euro and pound.

At­ten­tion turns to the re­lease Wed­nes­day of Chi­nese third-quar­ter eco­nomic growth fig­ures, with an AFP sur­vey pre­dict­ing a slow­down from the pre­vi­ous three months. The fig­ures will be closely watched after last week’s dis­ap­point­ing China trade re­sults were tem­pered by a bet­ter-than-ex­pected in­fla­tion read­ing.

The growth fig­ures will be fol­lowed later in the day by the third US de­bate in a bit­ter pres­i­den­tial elec­tion campaign, while the ECB holds a pol­icy meet­ing to­mor­row.

ECB chief Mario Draghi will be un­der pres­sure to clar­ify the bank’s plans after in­vestors were spooked by talk of an end to its stim­u­lus pro­gram.

Asian mar­kets climbed yes­ter­day as mixed read­ings on the US econ­omy and com­ments from a top Fed­eral Re­serve of­fi­cial raised ex­pec­ta­tions that US in­ter­est rate rises would be grad­ual.

Re­gional stock mar­kets ral­lied on the prospect of rates stay­ing low for longer. Tokyo ended 0.4 per­cent higher as the dol­lar pared early losses against the yen. Hong Kong ended 1.6 per­cent higher and Shang­hai closed up 1.4 per­cent.Syd­ney gained 0.4 per­cent and Seoul put on 0.6 per­cent, while Sin­ga­pore was up 0.1 per­cent. Manila surged 2.9 per­cent, while there were also healthy gains in Taipei and Jakarta. — Agen­cies

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