World markets edge higher as investors waver over US rates
Data due from Germany and statement due from Bank of England are uppermost in investors’ minds
London — Global shares edged up on Thursday, while the dollar steadied below an 11-week high as investors reassessed the Federal Reserve’s statements on inflation and looked to coming data for direction.
In Europe, the Stoxx 600 opened 0.5% higher ahead of the release of Germany’s closely watched Ifo business sentiment survey, which is expected to show a rise from two-year highs.
London’s FTSE 100 made smaller gains as investors awaited a Bank of England meeting for the latest clues about how soon stimulus could be withdrawn as the economy bounces back from the Covid-19 shock.
The MSCI world equity index was 0.1% firmer, edging towards record highs reached earlier in June.
Wall Street futures pointed to a stronger opening a day after the tech-heavy Nasdaq closed at a record high. S&P 500 e-minis and Nasdaq futures were both 0.3% firmer.
Asian markets also made small gains. The MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.1% higher, recovering from a one-month trough touched earlier this week, while Japan’s Nikkei was unchanged.
Stock markets have whipsawed over the past week, feeling the after-effects of a surprise projection for rate increases as soon as 2023 by the Fed which knocked stocks, boosted the dollar and led to the flattening of the US bond yield curve.
Investors are now pricing the first full US interest rate rise for February 2023 compared with December 2022 in the immediate aftermath of the Fed meeting.
Overnight, 10-year US Treasury yields hovered around 1.5% in muted trading, while government bond yields in the euro area drifted higher.
“Until bond yields break out in a sustainable fashion, in either direction, it remains very hard to determine which direction stocks are headed in over the near term,” JPMorgan analysts wrote in a note. “Much continues to hinge on the upcoming growth data.”
Europe released strong manufacturing activity data on Wednesday, while figures on ISM manufacturing and US non-farm payrolls are due next week.
The dollar hovered below an 11-week high against its main peers as traders navigated conflicting signals from Fed officials on the timing of a withdrawal of monetary stimulus.
On Wednesday, two Fed officials said a period of high inflation in the US could last longer than anticipated, just a day after Fed Chair Jerome Powell played down rising price pressures.
The dollar index, which measures the greenback against six rivals, was steady at 91.734. It was at 92.408 at the end of last week, the highest since April 9.
Against the Japanese yen, the dollar climbed to a 15-month high of 111.11. It was last slightly weaker at 110.84.
The Bank of England is expected to acknowledge the strength of inflationary pressures in recent data when it meets later in the day. A policy announcement is expected at 11am GMT.
“We do not expect the statement to push back against expectations that interest rates could start to move higher in the second half of next year,” ANZ economists said.
Thepound shed 0.1% against the dollar to $1.3958.
Oil prices gained for a second day after a bigger-than-expected drawdown in US crude and petroleum stockpiles reaffirmed the outlook for robust fuel demand.
Brent crude futures rose 0.4% to $75.50 a barrel and US crude jumped 0.5% to $73.45/bbl.
Spot gold prices slipped 0.1% to $1,776.3/oz.
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