Global shares, U.S. yields rise as investors eye rates, earnings
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[July 25, 2023] By
Chibuike Oguh
NEW YORK (Reuters) -Global equity markets and Treasury yields rose on
Monday as investors braced for interest rate decisions from key central
banks, including the U.S. Federal Reserve, as well as corporate earnings
that may shed light on the state of the economy.
An overwhelming majority of traders expect the Fed to raise rates by 25
basis points at its policy meeting this week, according to CME Group
data, helping to revive concerns of a looming recession following
resilient U.S. economic growth.
The European Central Bank is also expected to maintain a hawkish stance
when it meets this week, while the Bank of Japan is expected to keep its
super-loose monetary policy intact after its meeting.
The yields on 10-year notes were at 3.874%, rebounding from an early
session decline, while the rate-sensitive two-year yields were up at
4.8917%.
Yet, markets are also anticipating buoyant results from major U.S.
companies including Alphabet Inc, Meta Platforms Inc, Intel Corp and
Microsoft Corp, whose performance has mostly underpinned the nearly 19%
year-to-date gain in the benchmark S&P 500.
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"The most over-used phrase in this industry is 'cautiously optimistic'
but that is where we are," said Tom Plumb, portfolio manager at Plumb
Balanced Fund.
"We still think that in general the economy is going to be growing but
there will be continued rolling recessions of segments of the economy,
which is really healthy because it tends to lead to significant
long-term bull markets," Plumb said.
The MSCI world equity index, which tracks shares in 50 countries, was up
0.21%, while European stocks added just 0.06%.
On Wall Street, the three main indexes closed higher, led by gains in
financial, consumer discretionary, technology and energy stocks. The Dow
Jones Industrial Average rose 0.52% to 35,411.24, the S&P 500 gained
0.40% to 4,554.64 and the Nasdaq Composite added 0.19% to 14,058.87.
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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
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"The consensus is for the Fed to raise by 25 basis points and then
some more indication that they could be at the end. We don't have
much insight that it would be different but if it is, then it would
dramatically increase the volatility of markets," Plumb added.
The U.S. dollar edged up against major currencies after economic
data continued to show the resilience of the American economy
compared to its peers.
The purchasing managers' survey showed on Monday that U.S. business
activity slowed to a five-month low in July, dragged down by
decelerating service sector growth, but the data was better than
similar surveys out of Europe. The dollar index rose 0.297%, with
the euro down 0.56% to $1.1061.
Oil prices rose by more than 2% to a near three-month high buoyed by
tightening supply, rising U.S. gasoline demand, hopes for Chinese
stimulus measures and technical buying.
Brent futures rose 2.1% to settle at $82.74 a barrel, while U.S.
West Texas Intermediate (WTI) crude rose 2.1%, to settle at $78.74.
Prices of safe-haven gold were choppy as the dollar advanced. Spot
gold dropped 0.3% to $1,954.50 an ounce, while U.S. gold futures
gained 0.06% to $1,960.30 an ounce.
(Reporting by Chibuike Oguh in New York; Editing by Sharon
Singleton, Nick Macfie and Cynthia Osterman)
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