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

WASHINGTON/LONDON, Oct 26 (Reuters) – World stocks rose to a five-week high on Wednesday in choppy trading as U.S. stocks were mixed, with investors weighing disappointing earnings from U.S. heavyweights on hopes the Federal Reserve will slow its aggressive rate of interest. rate increase.

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

News that the British government’s plan to repair the country’s public finances will be delayed by more than two weeks until 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 a.m. GMT (1437 GMT )

The world stock index MSCI (.MIWO00000PUS) rose 0.36% to hit a five-week high. Europe’s Stoxx 600 (.STOXX) also touched a five-week high in choppy trade.

Google owner Alphabet ( GOOGL.O ) reported softer-than-expected ad sales after the close on Tuesday and Microsoft ( MSFT.O ) missed revenue forecasts, while a warning from Dutch semiconductor supplier ASM ( ASMI.AS ) raised concerns for slowing down economic growth.

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Some of Europe’s biggest banks have warned of growing risks as the economy slumps after posting stronger-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 stocks rallied, in a sign that some investors took comfort in the perception that a turnaround in the global rate-hiking cycle may be near.

While the Fed is widely expected to deliver another 75-basis-point rate hike in November, the sense that the Fed may then begin to slow its aggressive tightening cycle lifted sentiment in equity markets and took the edge off a rally in the dollar. .

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

The papers also noted “more downside risk” to earnings.

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

“I feel like it’s too early to call it ‘all done’ for equity markets – for example the Fed could push US real rates deeper into restrictive territory – so we’re treating this decline in the dollar as a corrective,” Chris said. . Turner, global head of markets at ING.

The Bank of Canada, meanwhile, announced a smaller-than-expected rate hike of 50 percentage points. That put its key interest rate at 3.75%, a 14-year high, but fell short of calls for another 75 basis point move to contain stubbornly high inflation.

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

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

In Australia, inflation rose to a 32-year high last quarter as the cost of building homes and gas rose. The surprise added pressure on the central bank to reverse its recent pivot, although markets doubt there will be a dramatic reversal.

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The Australian dollar rose more than 1%.

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

Market participants turned cautious after major state-owned banks were seen selling the dollar on Tuesday to stabilize the market, traders said.

Investors increased bets on the Bank of England raising its benchmark rate by a full percentage point on November 3 after the news and put the odds of such a move at around 37%, higher than before the delay was announced.

Gold prices jumped on a weaker dollar and bond yields. Spot prices rose by 0.82%.

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

Reporting by Dara Ranasinghe; Additional reporting by Ankur Banerjee in Singapore; Editing by Kim Coghill and David Holmes

Our standards: The Thomson Reuters Trust Principles.

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