Stocks hit two-year highs, dollar eases
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[February 07, 2024] By
Amanda Cooper and Wayne Cole
LONDON/SYDNEY (Reuters) -Global shares traded at their highest in over
two years on Wednesday, supported by relatively robust earnings and a
retreat in the dollar, although trouble among U.S. regional banks and
skepticism over China's efforts to support its markets made for cautious
trading.
Bonds came under modest pressure, following comments from Federal
Reserve officials that did little to shift expectations for the outlook
for monetary policy.
The MSCI All-World index rose 0.1% to reach its highest since
mid-January 2022, led in part by a rally in Chinese blue-chips, which
have gained almost 5% in the last two trading days.
In recent days, China's regulators have announced further curbs on short
selling and state investors said they were expanding their stock buying
plans.
Bloomberg News also reported President Xi Jinping would discuss the
stock market with financial regulators, though there was no confirmation
this had happened or what was discussed.
On Wednesday, the head of China's securities regulator had been
replaced, the official Xinhua news agency said, as policymakers struggle
to stabilize the country's main stock indexes after a plunge to
five-year lows.
"We're looking at more than $5 trillion being wiped out from the equity
markets. Clearly, they want to stem those losses, they want to introduce
and change and they're trying to be a lot more forceful about it,"
Aneeka Gupta, equity strategist at wisdomtree, said.
In Europe, stocks fell in an earnings-heavy day, while S&P 500 futures
and Nasdaq futures were down 0.1%. Companies reporting earnings on
Wednesday include Uber, Walt Disney and PayPal.[RESF/US]
The banking sector remained a concern as Moody's downgraded New York
Community Bancorp to junk citing pressure on its funding and liquidity.
The stock lost 22% on Tuesday, to be down 60% since it reported surprise
losses last week.
MORE FED SPEAKERS
The timing of U.S. rate cuts was no clearer after Federal Reserve
regional presidents Loretta Mester and Neel Kashkari welcomed the
progress on inflation but signaled there was more work to do before
policy could be eased.
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A man walks through the lobby of the London Stock Exchange in
London, Britain August 25, 2015. REUTERS/Suzanne Plunkett/ File
Photo
Fed Governors Adriana Kugler and Michelle Bowman, along with
regional presidents Thomas Barkin and Susan Collins also speak on
Wednesday.
"The events of the last few days (have) seen markets try and absorb
the fact that rate cuts might have to wait until much later in the
year, and what any delay means for asset prices and valuations," CMC
Markets chief market strategist Michael Hewson said.
"While Powell’s candor in ruling out a rate cut in March caught
markets by surprise this week also offers an opportunity to see if
other members of the FOMC share his mindset.
In an interview at the weekend, Fed Chair Jerome Powell said the
central bank could be "prudent" on the timing of rate cuts.
The probability of a U.S. rate cut as early as May now stands at
just 39%, when it was considered a done deal only a week ago.
Futures imply around 122 basis points of easing for all of 2024,
down from 145 basis points last week.
Treasuries came under pressure, leaving 10-year note yields up 4
basis points at 4.13%.
The dollar rose 0.1% to 148.13 yen , just shy of its recent 10-week
peak at 148.90. The euro edged up 0.1% to $1.077, while gold eased
0.1% to $2,033 an ounce, having fallen to $2,013.70 early in the
week.
Oil prices found support from a U.S. Energy Department assessment
that U.S. output would grow by 170,000 barrels per day (bpd) in
2024, instead of a previous estimate of 290,000 bpd.
Brent rose 0.7% to $79.14 a barrel, as did U.S. crude, at $73.85.
(Additional reporting by Harry Robertson in London and Wayne Cole in
Sydney;Editing by Shri Navaratnam, Emelia Sithole-Matarise and Chizu
Nomiyama)
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