subscribe Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Subscribe now
A cyclist passes the Federal Reserve building in Washington, DC, US. Picture: CHRIS WATTIE/REUTERS
A cyclist passes the Federal Reserve building in Washington, DC, US. Picture: CHRIS WATTIE/REUTERS

World stock markets stuttered on Wednesday while the dollar continued its rebound as traders waited to see if Federal Reserve chair Jerome Powell will push back against rate-cut talk when he speaks later in the day.

Financial markets reckon the Fed is now done with its most aggressive monetary tightening cycle in decades, and investors have ramped up bets for rate cuts next year since Friday’s US jobs data showed some signs of slowing.

Powell speaks on Wednesday and Thursday.

Fed Governor Christopher Waller said on Tuesday that the economy bears watching after “blowout” third-quarter GDP figures, while fellow governor Michelle Bowman said she still expects higher rates will be needed.

“I don’t think the Fed will be any tighter than it is right now but it won’t be quick to cut rates either,” said Tim Graf, head of macro strategy for Europe at State Street Global Markets.

The MSCI’s world stock index was down just 0.1%, having last week posted its biggest weekly jump in almost a year. Europe’s broad Stoxx 600 index was just a touch lower and US stock futures were little changed.

The MSCI’s broadest index of Asia-Pacific shares slipped 0.3% and Japan’s Nikkei 225 closed lower after Bank of Japan governor Kazuo Ueda told parliament the central bank doesn’t need to wait until real wages turn positive before exiting stimulus.

Hong Kong’s Hang Seng fell and an index of mainland blue chips lost 0.24%.

Chinese authorities have asked Ping An Insurance Group to take a controlling stake in embattled Country Garden, the nation’s biggest private property developer, four people familiar with the plan said.

A spokesperson for Ping An said the company hadn’t been approached by the government and denied the information.

In Europe, utilities stocks led sectoral declines, falling 1.2% to a one-week low, with E.ON, the region’s largest energy networks operator, losing 1.8% after it warned of a severe hit to fourth-quarter profit at its retail division.

Insurance stocks lost 0.7%, dragged by a 6.2% decline in Swiss Life Holding AG after the insurer’s full-year outlook on real estate worried markets.

“It’s been a bit of a roller coaster these last few weeks and, particularly this earnings season,” said Georgina Cooper, portfolio manager, global equities, at Newton Investment Management in London.

She said markets were reacting so much to single news events because companies were struggling to give earnings guidance due to the uncertainty around the post-Covid economic outlook and macro factors such as moves in oil prices and the lack of visibility into the pace of China’s recovery.

Treasury yields higher

In London trade, US treasury yields edged higher ahead of Powell’s speech. Two-year yields were last up 3 basis points at 4.91% .

The dollar index, which measures the currency against six major peers, was almost 0.2% firmer at 105.72, pulling away from the more than six-week low of 104.84 reached on Monday. Still, it remains well off the high at the start of this month at 107.11.

The majority of FX strategists surveyed by Reuters expect dollar weakness to linger for the rest of the year, amid a building consensus that the Fed’s tightening cycle is done, also signalling a peak in US yields.

“If the US is heading for slower growth but the ECB [European Central Bank] and BOE [Bank of England] cut rates first, that doesn’t undermine the dollar,” said Graf.

Reuters

subscribe Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Subscribe now

Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.