Stocks around 2023 highs as disinflation signal brings some relief
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[July 13, 2023] By
Huw Jones
LONDON (Reuters) - Global stocks traded around their highs for the year
on Thursday as investors bet that the Federal Reserve was finally taming
inflation and could end its rate hiking cycle as soon as this month.
U.S. data on Wednesday showed consumer prices rose modestly in June,
registering the smallest annual increase in more than two years as the
economy shifted into disinflation mode, helping to send oil prices
higher.
But the prospect of an end to rising borrowing costs, in the United
States at least, kept downward pressure on the dollar, which fell to its
lowest in more than a year against the euro on Wednesday on the U.S.
inflation news.[FRX/]
Interest rate futures showed markets have fully priced in another rate
hike from the Federal Open Market Committee (FOMC) later this month, but
expectations of any further increases have faded.
The softer dollar helped gold prices advance to near one-month highs.
The MSCI All Country stock index was up 0.4% at 691 points, around the
highs for the year, to gain 13.5% so far in 2023, though still not
wiping out all of the near 20% loss in 2022.
Stocks and bonds in Asia on rallied in response to the U.S. inflation
news, while in Europe, the STOXX index added to Wednesday's gains, up
0.4%, bringing its advance for the year to 8%.
Eren Osman, managing director of wealth management at Arbuthnot Latham &
Co, said the U.S. inflation news was encouraging, though markets will be
scrutinising the U.S. jobs data later on Thursday for signs of continued
softening to underpin the disinflation story.
"Let's give it a little cheer, but I wouldn't start to extrapolate that
to mean job done and no more hikes," Osman said.
"There is at least one more hike coming out of the Fed, but I do think
it means investors should feel very comfortable about looking to add
duration to their portfolios now, and that is something we are looking
to do ourselves, The risk is really to the downside here from yields,"
Osman said.
Stocks, however, may have seen the best part of this year already and
face headwinds from pressure on consumers and on jobs, he added.
S&P 500 futures and Nasdaq futures were firmer.
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Passersby walk past an electric board
displaying Japan's Nikkei share average outside a brokerage in
Tokyo, Japan April 18, 2023. REUTERS/Issei Kato
DISMAL CHINA DATA
Investors in Asia shook off dismal China trade data, which showed
both exports and imports contracted at a worse-than-expected pace
last month, betting that the latest bad news will trigger more
stimulus measures.
MSCI's broadest index of Asia-Pacific shares outside Japan surged
1.9%, bolstered by a 2.6% jump in Hong Kong's Hang Seng index and a
1.6% gain in Australia's resources-heavy shares.
Japan's Nikkei rose 1.5%.
Chinese tech giants listed in Hong Kong rallied 3.8% after Premier
Li Qiang urged the companies to support a slowing economy, adding to
signs that a years-long crackdown on the sector is over.
Bonds heaved a sigh of relief after a rout last week sent global
yields sharply higher. The 10-year Treasury yield eased to 3.8103%,
having dived 12 bps (bps) overnight and down from a seven-month top
of 4.0940% on Friday.
Rate-sensitive two-year yields slipped to 4.6408, after plunging 15
bps overnight. That led to a steepening in the yield curve.
The Japanese yen, which had come under massive selling pressure due
to Japan's ultra easy monetary stance, gained more than 6 yen on the
dollar in nine sessions and was last at 138.41 per dollar.
Oil prices traded near the highest in two months on a soft U.S.
dollar. Brent crude futures rose 0.45% to $80.47 per barrel and U.S.
West Texas Intermediate crude futures were up 0.3% at $76.01.
Gold prices were up 0.16% at $1,960.29 per ounce.
(Reporting by Huw Jones, additional reporting by Stella Qiu; Editing
by Jamie Freed, Lincoln Feast, Kim Coghill, William Maclean)
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