Stocks rise as investors put aside fears of rate hikes

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WASHINGTON/LONDON — Global equities rallied on Wednesday, with Wall Street rising again on a Big Tech boost and European stocks gaining on strong earnings as investors put aside worries about rising interest rates. interest at the moment.

Major U.S. equity indices started the session with gains as high-growth stocks continued their recent rally.

The Dow Jones Industrial Average rose 296.97 points, or 0.84%, to 35,759.75, the S&P 500 gained 53.4 points, or 1.18%, to 4,574.94 and the Nasdaq Composite added 195.32 points, or 1.38%, to 14,389.77 as of 10:40 a.m. EST (15:40 GMT).

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The pan-European STOXX 600 climbed 1.8%, MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 1.8% to a more than two-week high and the blue-chip Nikkei closed up just over 1%.

Investors were also reassured by positive headlines in recent days suggesting tensions between the West and Russia over Ukraine may ease and a string of upbeat earnings boosted sentiment towards the assets. at risk.

French President Emmanuel Macron, who met Russian President Vladimir Putin on Monday, said on Tuesday he believed steps could be taken to defuse the crisis in which Russia has massed troops near Ukraine, but said that she was not planning an attack.

On the earnings front, French fund manager Amundi reported a sharp rise in profits on Wednesday, British pharmaceutical company GSK’s quarterly results beat forecasts and Dutch bank ABN Amro reported better-than-expected net profit of 552 million euros for the fourth quarter.

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“The past few days have seen positive headlines on Russia/Ukraine with negotiations between Macron and Putin and reports of German efforts to de-escalate the crisis,” said Mohit Kumar, managing director, interest rate strategy, Jefferies.

“But we remain of the view that a bigger concern for risky assets is the removal of central bank accommodative measures, as markets have become accustomed to ample liquidity and low rates for a long time.”

Major central banks have become more hawkish in the face of stiffer-than-expected inflation, pushing bond yields higher.

The European Central Bank could raise rates this year, new Bundesbank President Joachim Nagel said in an interview with the newspaper.

Barring any big surprises, Thursday’s U.S. consumer price index should cement expectations that the Federal Reserve will raise rates next month, with a solid print providing additional support for those forecasting a bigger rate hike. 50 basis points.

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Japan’s 10-year bond yield fell from a session high of 0.215%, its highest since January 2016. But after strong selling, broader bond markets stabilized with prices rising and yields falling. decrease.

The two-year US Treasury yield hit its highest level since February 2020.

“Our economists expect the Fed to hike five times this year, three times in 2023 and twice in 2024,” Goldman Sachs said in a research note.

“We have revised our US Treasury yield forecast upwards to take into account the economic backdrop and the Fed’s hawkish turn. We now see 10-year UST yields ending this year at 2.25% (vs. 2% previously) and next year at 2.45% (vs. 2.3%). »

The yield on the 10-year German Bund was down that day at 0.23%.

“I rarely use the overdone move in markets, but I would say this move in bonds has been overdone. The speed has been so fast since Thursday that a correction was due,” said Chief Strategist Piet Haines Christiansen. , Danske Bank. “We still have the US CPI tomorrow, so let’s see what happens after that.”

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The ECB’s hawkish stance last week left Bund yields on course for their biggest monthly rise in a year.

Rising borrowing costs and signs of rate normalization in Europe have boosted bank stocks – a sub-index of European bank stocks is at its highest since 2018, rising sharply since Thursday’s ECB meeting.

In the currency markets, the dollar index lost ground against six peers, trading down 0.14%.

The euro rose 0.21% to $1.1438, stabilizing from a three-week high, after European Central Bank President Christine Lagarde cut bets for aggressive currency hikes. interest rate.

The yen fell 0.10% to $115.4300.

Oil prices stabilized around $90 a barrel as the prospect of increased supply from Iran and the United States kept prices under pressure.

Brent crude rose $1.18, or 1.3%, to $91.96 a barrel. U.S. crude last rose $1.09, or 1.22%, to $90.45 a barrel.

Gold prices edged higher on Wednesday as a pullback in US Treasury yields and a weaker dollar offered support for the safe-haven metal ahead of US inflation data. Spot gold prices rose $2.6151 or 0.14% to $1,828.10 an ounce.

(Reporting by Chris Prentice; Editing by Nick Macfie)

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