Global stock markets jump as traders consider US rate outlook
Comments from Fed officials reinforced the view that sticky inflation and a resilient US economy will keep the bank from easing monetary policy anytime soon
Global stock markets mostly rose Thursday with traders mulling the outlook for US interest rates as Federal Reserve officials questioned the need for a cut anytime soon.
Oil prices were mixed following the previous day’s losses on data indicating soter demand in the United States and fading fears of a regional war in the Middle East.
Investors looked past a sell-off on Wall Street Wednesday, when tech firms were hit by worries that borrowing costs would be kept elevated longer than expected, as Neflix later Thursday kicks off a spate of earnings reports by tech firms.
Comments from Fed officials reinforced the view that sticky inflation and a resilient US economy will keep the bank from easing monetary policy anytime soon.
A rally across global markets, which saw some hit record highs this month, has given way to concerns that valuations may be overdone, and analysts said the current earnings season is key to maintaining momentum.
“The stock market has found it increasingly difficult to maintain intraday gains as participants have been in more of a de-risking mode following five straight monthly gains that have stretched valuations to a point that have clashed with rising interest rates,” said market analyst
Patrick O’hare at Briefing.com. Expectations for US rate cuts in 2024 have fallen from six predicted at the start of the year to just two, while some analysts have even warned of a possible hike.
“The US central bank remains on track to cut rates twice this year, most likely starting at its September meeting,” said Solita Marcelli at UBS Group AG.
Oil prices were mixed ater losing more than three per cent Wednesday on figures showing a forecast-busting build-up in US stockpiles that raised questions about demand in the world’s top economy.
Relief that Israel had held off any retaliation for the weekend’s missile atack by Iran -- soothing fears of a conflict between the Middle East foes -- also weighed on oil prices.
Foreign exchange markets are also being closely followed ater the dollar pushed uncomfortably higher against its peers as hopes for quick US rate cuts evaporate.
Particularly in focus are the yen and won ater US Treasury Secretary Janet Yellen joined her Japanese and South Korean counterparts in saying they were keeping an eye on movements. The statement came ater South Korea’s Choi Sang-mok and Japan’s Shunichi Suzuki shared “serious concerns” on the recent weakness of their currencies and agreed to take “appropriate actions” to counter extreme volatility.
Analysts said the statement with Yellen suggested Washington would not push back against intervention by the countries.
The yen has lost almost nine per cent this year and the won about seven per cent.
“The fact that the yen has resumed its selling suggests traders are now either testing the patience of authorities or calling their bluff, as verbal intervention has so far been ineffective,” said Fawad Razaqzada, market analyst at City Index and FOREX.COM.
Meanwhile, European shares rose on Thursday, boosted by industrials ater Swiss engineering company ABB touched a record high following upbeat results, while Germany-listed Sartorius had its biggest one-day drop in 17 months ater bleak quarterly orders.
The continent-wide STOXX 600 closed 0.3% higher, as the earnings season picked up steam.
ABB jumped 6.3% ater reporting beter-thanexpected first-quarter profit and signalling faster growth in coming months, liting the industrial goods and services sector 0.7%.
Telecommunications climbed 1%, boosted by a 6.7% jump in Sweden’s Tele2 following firstquarter service revenues and earnings beat.
Banks also jumped 1.9%, led by a 5.3% advance in Bankinter ater it sounded an optimistic tone on the future evolution of lending income following a robust first-quarter. Millennium bcp rose 6% as the Portuguese bank will resume dividend payments ater a one-year hiatus.
On the flip side, Sartorius slumped 15.9% ater the lab supplies maker’s first-quarter figures missed expectations for order intake and revenue. The company’s France-listed shares dropped 15.7%.
As markets gear up for a flurry of corporate reports in the weeks to follow, first-quarter earnings are expected to decrease 12.1% year-on-year, LSEG data showed on Tuesday.
Meanwhile, the European Central Bank made it clear that a June interest rate cut is coming but policymakers continued to differ on moves thereater or how low interest rates can go before once again starting to stimulate the economy.
“The fact that the ECB seems to have distanced itself from the Federal Reserve concerning monetary policy could also offer some support for European equities,” said Daniela Hathorn, senior market analyst at Capital.com.