LDN - Business

Stocks stutter as spotlight turns to Fed chief, oil under pressure

[November 08, 2023] By Dhara Ranasinghe

LONDON (Reuters) - World stock markets stuttered on Wednesday, while the dollar continued its rebound, as traders waited to see if U.S. Federal Reserve chief Jerome Powell will push back against rate-cut talk when he speaks later in the day.

Oil prices fell to their lowest levels since July, remaining under pressure on concerns over waning demand from top oil consumers the United States and China.

Financial markets reckon the Fed is now done with its most aggressive monetary tightening cycle in decades, and investors have ramped up bets for rate cuts next year since Friday's key U.S. jobs data showed some signs of slowing.

Powell speaks on Wednesday and Thursday.

Fed Governor Christopher Waller said on Tuesday that the economy bears watching after "blowout" third-quarter GDP figures, while fellow governor Michelle Bowman said she still expects higher rates will be needed.

"I don't think the Fed will be any tighter than it is right now but it won't be quick to cut rates either," said Tim Graf, head of macro strategy for Europe at State Street Global Markets.

MSCI's world stock index was down just 0.1% , having last week posted its biggest weekly jump in almost a year.

Europe's broad STOXX 600 index was just a touch lower and U.S. stock futures were little changed .

MSCI's broadest index of Asia-Pacific shares slipped 0.3% and Japan's Nikkei 225 closed lower after Bank of Japan Governor Kazuo Ueda told parliament the central bank doesn't need to wait until real wages turn positive before exiting stimulus.

Hong Kong's Hang Seng fell and an index of mainland blue chips lost 0.24%.

Chinese authorities have asked Ping An Insurance Group to take a controlling stake in embattled Country Garden, the nation's biggest private property developer, four people familiar with the plan said.

A spokesperson for Ping An said the company had not been approached by the government and denied the information reported by Reuters.

In Europe, utilities stocks led sectoral declines, falling 1.2% to a one-week low, with the region's largest energy networks operator, E.ON, losing 1.8% on expecting a severe hit to fourth-quarter profit at its retail division.

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Federal Reserve Chairman Jerome Powell speaks during a meeting of the Economic Club of New York in New York City, U.S., October 19, 2023. REUTERS/Brendan McDermid/File Photo

Insurance stocks lost 0.7%, dragged by a 6.2% decline in Swiss Life Holding AG after the insurer's full-year outlook on real estate worried markets.

"It's been a bit of a roller coaster these last few weeks and, particularly this earnings season," said Georgina Cooper, portfolio manager, global equities, at Newton Investment Management in London.

She said markets were reacting so much to single news events because companies were struggling to give earnings guidance due to the uncertainty around the post-COVID economic outlook and macro factors such as moves in oil prices and the lack of visibility into the pace of China’s recovery.

WEAK OIL

Brent crude fell to a fresh three-month low near $81 a barrel and was last down 0.7% , while U.S. crude futures tumbled 0.8% to touch a low around $76.51

In London trade, U.S. Treasury yields edged higher ahead of Powell's speech.

Two-year yields were last up 3 basis points at 4.91%.

The dollar index, which measures the currency against six major peers, was almost 0.2% firmer at 105.72, pulling away from the more than six-week low of 104.84 reached on Monday.

Still, it remains well off the high at the start of this month at 107.11.

The majority of FX strategists in a Reuters poll expect dollar weakness to linger for the rest of the year, amid a building consensus that the Fed's tightening cycle is done, also signaling a peak in U.S. yields.

"If the U.S. is heading for slower growth but the ECB (European Central Bank) and BoE (Bank of England) cut rates first, that doesn't undermine the dollar," said State Street's Graf.

(Reporting by Dhara Ranasinghe Additional reporting by Alun John in London and Kevin Buckland in Tokyo; Editing by Mark Potter and Chizu Nomiyama)

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