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

WASHINGTON/LONDON, Oct 26 (Reuters) – Global shares rose to five-week highs in flat trade on Wednesday, as U.S. stocks were mixed, with investors weighing disappointing earnings from U.S. heavyweights on hopes that the Federal Reserve will slow its aggressive interest rate hikes. Rate rise.

The US dollar index fell to a five-week low as the pound hit its highest level since September 13, continuing its rally since Rishi Sunak became Britain’s prime minister.

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

Wall Street was 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 am EDT (1437 GMT).

MSCI’s world stock index (.MIWO00000PUS) rose 0.36% and hit a five-week high. Europe’s Stoxx 600 (.STOXX) also hit a five-week high in trading.

Google owner Alphabet ( GOOGL.O ) posted softer-than-expected ad sales after Tuesday’s close and Microsoft ( MSFT.O ) missed revenue forecasts, while a warning from Dutch semiconductor supplier ASM ( ASMI.AS ) added to concerns about slowing economic growth. .

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Some of Europe’s biggest banks warned of growing risks after the economy posted bigger-than-expected profits, helped by a trading boom in volatile markets and higher interest rates. Deutsche Bank ( DBKGn.DE ) posted a better-than-expected jump in third-quarter profit and Britain’s Barclays ( BARC.L ) also beat profit forecasts.

Asian shares rallied in a sign that some investors were taking comfort in the perception that a turning point in the global rate hike cycle may be nearing.

Although the Fed is widely expected to deliver another 75 basis point hike in November, the sense that the Fed may begin to slow its aggressive tightening cycle has lifted sentiment in stock markets and taken the edge off the dollar rally.

“I don’t want to take the optimism too far. We think it’s still too soon for the Fed to make a significant pivot, and strong markets make the Fed want to be more cautious about wanting to make a pivot,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley.

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Sheets also identified “high downside risk” for earnings.

Data on Tuesday showed slowing home price growth and boosting consumer confidence, with some signs that the Fed’s aggressive rate hikes are starting to cool the labor market.

“It feels too early for equity markets to declare the ‘all-clear’ — such as the Fed could push US real rates deeper into restrictive territory — that we’re considering a correction to this dollar decline,” Chris said. Turner, Global Head of Markets at ING.

The Bank of Canada, meanwhile, announced a lower-than-expected rate hike of 50 percentage points. It kept its policy rate at 3.75%, a 14-year high but lower on calls for another 75 basis points move to contain stubbornly higher inflation.

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

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

In Australia, inflation rose to a 32-year high last quarter as house construction and gas costs rose. The surprise added pressure on the central bank to reverse a recent dovish turn, although markets doubted a dramatic change.

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The Aussie dollar rallied more than 1%.

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

Traders said market participants were cautious after seeing major state-owned banks selling the dollar on Tuesday to stabilize the market.

Investors increased bets on the Bank of England, which raised its benchmark rate by a full percentage point on November 3, and put the odds of such a move at around 37%, the highest before the announcement of the delay.

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

Elsewhere in commodities, oil prices rose on a weaker dollar and supply concerns. US crude rose by $2 per barrel.

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

Our criteria: Thomson Reuters Trust Principles.

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