World stocks hit new highs, oil soars, Fed moves into
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[November 01, 2017]
By Dhara Ranasinghe
LONDON (Reuters) - Upbeat earnings reports
helped drive global stock markets to record highs on Wednesday, as
investors turned their focus to a U.S. Federal Reserve meeting for fresh
insight on the outlook for monetary policy in the world's biggest
Oil prices extended a bull run on hopes that major producers would
maintain their output cuts. The dollar firmed ahead of a Fed rate
decision and digital currency bitcoin surged to a record high.
The pan-European STOXX 600 index <.STOXX> climbed to its highest level
since August 2015 as stock markets in London <.FTSE>, Paris <.FCHI> and
Frankfurt <.GDAXI> gained 0.5 to 1.2 percent in early trade.
That followed a rally in Asia, where stock markets hit 10-year highs.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> rose 0.9 percent, led by a 1.3 percent jump in South
Korea <.KS11>. Japan's Nikkei <.N225> soared 1.9 percent.
South Korea's economic growth accelerated to its fastest pace in seven
years last quarter. Growth in Taiwan during the same period was the
strongest in 2 1/2 years.
Shares of Japanese multinational Sony rose more than 11 percent, after
the company announced record annual profit in 2017 owing to strong sales
of semiconductors and favorable exchange rates.
In the United States, Wall Street's three major indexes <.DJI> <.SXP> <.IXIC>
ended October with their biggest monthly gains since February.
The advance reading of U.S. GDP for July-September showed healthy growth
of 3.0 percent, above the average of just over 2.0 percent since the
financial crisis in 2008-09.
As of Tuesday's close, 45 percent of MSCI Europe companies had reported
results for the third quarter, of which 66 percent either beat or met
expectations, according to Thomson Reuters I/B/E/S data.
The combination of robust economic and corporate earnings growth from
the third quarter is giving the long-running bull market a new lease of
MSCI's world stock index climbed 0.3 percent to a record high
"While earnings are good, inflation and bond yields are relatively low,
why would you take your money out of stocks?" said Michael Hewson, chief
market analyst at CMC Markets.
The Fed concludes a meeting later on Wednesday. It is widely expected to
leave interest rates unchanged and raise rates in December.
The rate decision comes just before an expected announcement of the next
head of the central bank. The White House has said U.S. President Donald
Trump will announce his Fed pick on Thursday.
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Traders work in front of the German share price index, DAX board, at
the stock exchange in Frankfurt, Germany, May 8, 2017. REUTERS/Pawel
Trump is expected to pick Fed Governor Jerome Powell, who is considered more
dovish on interest rates than some other candidates and thus relatively
stock-market friendly, sources have told Reuters.
Expectations that Powell will lead the Fed have helped to drive down U.S. bond
yields and the dollar this week.
Investors were also focused on a U.S. tax-cut plan. Legislation had been
expected on Wednesday, but sources said Republicans in the House of
Representatives would delay it for a day as lawmakers try to resolve differences
involving retirement accounts and state and local taxes.
"If the negotiation gets derailed, that would have a negative impact on markets,
so we need to be careful," said Masahiro Ichikawa, senior strategist at Sumitomo
Mitsui Asset Management.
KIWI, BITCOIN JUMP
The dollar's index against a basket of six major currencies stood at 94.60, down
from last week's three-month peak of 95.15 <.DXY>.
The euro <EUR=> was little changed at $1.1644, some distance from the
three-month low of $1.1574 it touched on Friday after the European Central
Bank's stance was perceived to be more dovish than expected.
The biggest currency mover was the New Zealand dollar <NZD=D4>. It jumped over 1
percent to $0.6931 after the country's jobless rate sank more than expected to a
nine-year low of 4.6 percent.
Bitcoin <BTC=BTSP> hit another record high of $6,450, boosted by bets the
crypto-currency might enter the financial mainstream after the world's largest
derivatives exchange operator said on Tuesday it would launch bitcoin futures.
Oil prices extended a rally which began in early October, largely driven by
hopes that oil producing countries will agree to extend an output cut at their
meeting at the end of this month.
Brent futures <LCOc1>, the international benchmark for oil prices, were at
$61.50 per barrel, up 0.9 percent on the day, having hit fresh two-year highs.
Brent is up almost 40 percent since its 2017 lows last June.
U.S. West Texas Intermediate crude <CLc1> was up over half a dollar to $54.95 a
barrel, or 1 percent. It is up some 30 percent since 2017 lows hit in June.
(Reporting by Dhara Ranasinghe; Additional reporting by Hideyuki Sano in Tokyo;
Editing by Larry King)
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