LDN - Business

Shares get a tech boost; dollar dithers ahead of inflation data

[June 13, 2023] By Amanda Cooper

LONDON (Reuters) -Global shares rose on Tuesday, taking their lead from an upbeat session on Wall Street ahead of key U.S. inflation data that could shape the outlook for Federal Reserve monetary policy.

Consumer inflation on Tuesday and wholesale data on Wednesday could offer investors evidence of how successful the Fed has been in taming price pressures, and an indication of how much more U.S. rates may need to rise.

The MSCI All-World index was last up 0.3%. Technology stocks were standout gainers in most markets. In Europe, shares in Hexagon rose by as much as 6.4% after the Swedish industrial group said it had signed a collaboration agreement with Nvidia.

Nvidia shares have risen by nearly 200% this year, briefly pushing the company's market value above $1 trillion, as investor enthusiasm for anything exposed to artificial intelligence has lifted the entire sector.

Anticipation of a flood of capital into chip-related companies also helped push Japan's Nikkei index to its highest in 33 years on Tuesday.

On Monday, the S&P 500 and the Nasdaq rallied to their highest closing levels since April 2022.

The S&P 500 has entered a technical bull market, as gains in market heavyweights Amazon, Apple and Tesla have lifted it by over 20% from its October 2022 lows. So far this year, the S&P has gained 13%, but its equal-weight equivalent, which dilutes the impact of the largest companies in the index, has risen just 3%.

The Fed is expected to take a break from raising rates, but surprise hikes from the Reserve Bank of Australia and the Bank of Canada last week have served as a reminder that a pause in a rate cycle is sometimes just that.

"For me, it's 50/50 - they could hike - and I think they should, because it will give them more flexibility in July and for the rest of the year," CMC Markets chief markets strategist Michael Hewson said.

"We are closer to 'peak Fed' than we are to anything else. So, for me, it’s a question of how much more juice has the dollar got before it rolls back down again," he said.

"I can't say, with any degree of confidence, that the Fed has any more than 25 basis points to go, if that, and I can't say the same for the ECB, or the Bank of England," he added.

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The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 9, 2023. REUTERS/Staff

The BoE meets next week and is forecast to raise interest rates by another quarter point, from 4.50% currently.

A VERY BRITISH PROBLEM

Data on Tuesday that showed a rapid pickup in UK wage growth in the three months to April could complicate matters for the central bank, which is already grappling with inflation that is over four times its target of 2%.

"The key takeaway here is, not only was unemployment not ticking higher, we've got strong jobs growth and also wage growth is just extremely high right now and that's going to be making the Bank of England feel very uncomfortable," City Index senior markets analyst Fiona Cincotta said.

Money markets show traders now anticipate a peak in UK rates at around 5.6% by February, up from a terminal rate of 4.85% by November a month ago.

The European Central Bank, meanwhile, is expected to raise rates by 25 basis points on Thursday and signal it has more room to tighten policy, while the Bank of Japan is expected to maintain its ultra-loose policy after it meets on Friday.

In currencies, the dollar index, which measures the performance of the U.S. currency against six others, fell 0.2% to 103.32. Sterling rose 0.4% against the dollar to $1.2567 after the UK wage data, while the euro rose 0.4% to $1.0796.

The dollar was flat against the yen at 139.57.

In commodities, Brent crude futures, which are 40% below where they were this time last year, were last up 2% at $73.33 a barrel, while U.S. crude futures rose 1.8% to $68.31. Gold rose 0.5% to $1,967 an ounce.

(Additional reporting by Farouq Suleiman in London and by Julie Zhu in Hong Kong; Editing by Christopher Cushing, Jamie Freed, Simon Cameron-Moore & Conor Humphries)

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