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 as U.S. stocks were mixed, as investors weighed disappointing earnings from the U.S. heavyweight and hoped the Federal Reserve would cut interest rates. Rate increases.

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

News that the British government’s plan to repair the country’s public finances could be delayed by more than two weeks to November 17 helped boost bond yields.

Wall Street was mixed. The Dow Jones Industrial Average (.DJI) was down 0.51%, the S&P 500 (.SPX) was off 0.13% and the Nasdaq Composite (.IXIC) was down 0.97% at 10:37 a.m. EDT (1437 GMT).

The MSCI World Stock Index (.MIWO00000PUS) rose 0.36% and hit a five-week high. Europe’s Stoxx 600 (.STOXX) touched a five-week trading high.

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

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After posting stronger-than-expected profits, some of Europe’s biggest banks warned of growing risks as the economy falters, helped by volatile markets’ business expansion and higher interest rates. Deutsche Bank ( DBKGn.DE ) posted a better-than-expected jump in third-quarter profit, while Britain’s Barclays ( BARC.L ) beat profit forecasts.

Asian stocks rallied, in a sign that some investors are taking comfort in the perception that the global inflationary cycle may be nearing a turn.

Although the Fed is widely expected to deliver another 75 basis point rate hike in November, sentiment that the Fed may begin slowing its aggressive tightening cycle lifted sentiment in stock markets and led the dollar to rally.

“I don’t want to take the optimism too far. We think it’s still too soon for the Fed to create a useful pivot, and when markets are strong, the Fed wants to be more cautious in looking to act,” said Andrew Luhoch, chief cross-asset strategist at Morgan Stanley.

Sheets also said “more downside” to earnings.

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Data on Tuesday showed a slowdown in home price growth and consumer confidence, with some signs that the Fed’s tightening rate is starting to slow the labor market.

“I feel it’s too early to declare an ‘all clear’ for equity markets – for example, the Fed could push US real rates into restrictive territory – meaning we see the dollar weakening as a correction,” said Chris Turner, head of global markets at ING.

The Bank of Canada, meanwhile, showed a 50 percentage point increase that was less than expected. That left the policy rate at 3.75%, a 14-year high but short on the call, leaving it another 75 basis points to contain higher inflation.

MSCI’s 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 above $1 for the first time in five weeks.

In Australia, inflation rose to a 32-year high last quarter as spending on housebuilding and gas rose. The surprise added pressure on the central bank to reverse its recent dovish move, although markets were skeptical of a dramatic reversal.

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The Australian dollar rose more than 1 percent.

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

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

Investors increased bets on the Bank of England after the news, raising the benchmark rate a full percentage point on Nov. 3 and putting the odds of a move at around 37% higher than before the announcement of the delay.

Gold prices rose as the dollar and bond yields weakened. Spot prices increased by 0.82 percent.

Among other commodity prices, oil prices rose in line with a weaker dollar and supply. US crude rose by $2 a barrel.

Reporting by Dhara 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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