Global shares close in on worst month so far this year
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[August 30, 2023] By
Naomi Rovnick and Ankur Banerjee
LONDON, SINGAPORE (Reuters) - Global equities edged up on Wednesday as
data suggested U.S. inflation pressures were moderating, but were on
course to end August with their worst monthly performance of 2023 so
far.
MSCI's broadest index of global shares added 0.2%, following upbeat
moves in Asia that continued to benefit from Chinese measures to boost
investment in its beaten-down stock market, and weak U.S jobs data on
Tuesday that sparked hopes the Federal Reserve was done with rate hikes.
On Wednesday, European shares nudged higher, while a gauge of Asian
shares gained 0.35% and Japan's blue-chip Nikkei touched its highest in
over two weeks.
Wall Street stocks rallied on Tuesday, with all three of its major stock
indexes ending sharply higher. Data showed U.S. job openings dropped to
the lowest level in nearly 2-1/2 years in July, signaling inflation
pressures caused by a tight labour market and companies were easing
ahead of the Fed's Sept. 19 meeting.
"The U.S. labor market is moving towards better balance," SEB Group U.S.
economist Elisabet Kopelman said in a note to clients, "increasing
prospects for the Fed to achieve a soft landing for the economy."
Still, MSCI's global stock gauge has fallen more than 3% in August,
thanks to hawkish signals from the Fed's latest meeting minutes and
chair Jerome Powell's speech on Friday at the Jackson Hole central
bankers' symposium.
Europe's Stoxx 600 share index was steady in early dealings as investors
assessed inflation reports from Spain and Germany ahead of the euro zone
consumer prices report for August on Thursday.
Spanish inflation rose 2.6% in August, as economists polled by Reuters
had expected.
In North Rhine Westphalia, Germany's most populous state, consumer
prices in August rose 0.5% month-on-month and 5.9% year-on-year.
Economists polled by Reuters expect the headline euro zone inflation
rate to have moderated to 5.1% in August from 5.3% in July, still far
above the European Central Bank's (ECB) 2% goal.
Euro zone inflation has exceeded the target level for two years. Still,
according to Barclays chief European economist Sylvia Ardagna, the ECB
might also pause a lengthy rate hike cycle as economic pain deepens.
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Passersby are reflected on an electric
stock quotation board outside a brokerage in Tokyo, Japan April 18,
2023. REUTERS/Issei Kato/File Photo
"The (monetary) tightening cycle is now complete if the growth
slowdown pointed to by high frequency indicators is confirmed,"
Ardagna said.
Meanwhile, a clearer picture of whether hawkish Fed signals that
shook markets in August were overdone will form this week, when U.S.
payrolls and personal consumption expenditure reports are due.
For now, markets are pricing in an 87% chance of the Fed standing
pat at its meeting next month, the CME FedWatch tool showed. The
odds of another pause at the central bank's November meeting have
risen to 51% from 38% earlier this week.
The headline rate of U.S. inflation, at 3.2% for the 12 months to
July, is also trending closer to the Fed's target of around 2% after
the world's most influential central bank hiked rates by 525 basis
points (bps) since March 2022.
U.S. Treasury yields were largely stable on Wednesday after moving
lower after Tuesday's jobs data. The two-year U.S. yield, which
moves inversely to the price of the government debt instrument and
tracks interest rate expectations, was at 4.91%, just above a
three-week low of 4.871% touched on Tuesday.
Germany's two-year yield rose 7 bps to 3.099% after regional Germany
inflation data.
Against a basket of currencies, the dollar inched up 0.15% to 103.68
after slipping nearly 0.4% on Tuesday.
The euro was 0.2% lower at $1.0858.
The yen weakened 0.4% to 146.48 per dollar and remained at levels
that led to intervention in the currency market last year by
Japanese authorities.
U.S. crude rose 0.2% to $81.46 per barrel and Brent was at $85.70,
up 0.4%.
(Reporting by Ankur Banerjee and Naomi Rovnick; additional reporting
by Dhara Ranasinghe; Editing by Mark Potter)
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