Shares hit new highs ahead of central bank meetings

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A Wall Street sign is visible outside the New York Stock Exchange (NYSE) in New York, New York, United States on June 28, 2021. REUTERS / Andrew Kelly

  • Global stocks up 0.25, just below record
  • Nikkei rally after LDP retains majority in Japan
  • Decisive week for monetary policy, led by the Fed

NEW YORK / MILAN, Nov. 1 (Reuters) – Global stock markets rose on Monday at the start of an important week for central bank meetings, helped by fiscal stimulus bets in Japan and not deterred by fears of future hikes interest rates that tempered bonds.

Stocks on Wall Street hit record highs, led by a booming energy sector, before the benchmark S&P 500 fell to trading near breakeven. European stocks also hit record highs following bullish earnings reports and a rise in bank stocks.

The pan-European STOXX 600 (.STOXX) rose 0.7% to end at a record closing high, the global mood being supported by the post-election boost from Japan and the stabilization of coal prices in China.

The eurozone banking sector (.SX7P) hit its highest level in more than two years and was the best performer of the day as bond yields surged following expectations of the European Central Bank to hike rates next year.

The MSCI Global Equity Index (.MIWD00000PUS) gained 0.25% while the Dow Jones Industrial Average (.DJI) rose 0.13%, the S&P 500 (.SPX) edged down 0.07 % and the Nasdaq Composite (.IXIC) rose 0.23%.

Japan’s Nikkei (.N225) closed 2.6% higher after Prime Minister Fumio Kishida’s Liberal Democrats took a comfortable unexpected victory, raising hopes for political stability and recovery on the horizon. Read more

The dollar fell after registering its biggest daily rise in more than four months last Friday as hedge funds cut bearish bets ahead of the Federal Reserve’s policy meeting this week.

Markets are calm ahead of the storm of three central bank meetings this week, said Marc Chandler, chief market strategist at Bannockburn Global Forex. The Reserve Bank of Australia meets on Tuesday, the Fed on Wednesday and the Bank of England on Thursday.

“The markets are worried about a more hawkish type of cut,” Chandler said. “The Fed could drop its characterization of inflation as transient, and the second thing is that the markets say that as soon as the Fed finishes its cut, they will raise rates.”

Fed Chairman Jerome Powell said the reduction would be complete by mid-2022, which was set for June, but it could also mean May, Chandler said.

“The market should beware of a more aggressive and hawkish view of the Fed,” he said, meaning market participants will not be worried about taking profits on long dollar positions.

The dollar index, which tracks the greenback against a basket of six currencies, fell 0.24% to 93.966.

The euro appreciated 0.28% to $ 1.1592, while the yen traded 0.08% to $ 114,900.

U.S. Treasury yields rose and German bond yields rose slightly, but reduced their earlier gains as investors held onto their bets for two ECB rate hikes next year.

ECB President Christine Lagarde has disappointed expectations of a firm pullback against recent market price hikes next year, which are at odds with the bank’s inflation outlook.

The 10-year US Treasury bill rose 2.8 basis points to a yield of 1.5768%, while German 10-year yields slipped 0.8 basis points to a return of -0.107% .

“We could come out of (the) week after the peak of yield volatility, or at least, after the rate hike fever,” said John Briggs, NatWest Markets strategist. “A lot of the things that have gone parabolic and boiled market rate hike expectations seem to at least be calming down a bit.”

Commodities stabilized with another drop in Chinese coal prices pushing them 50% below last month’s record. read more Oil prices reversed earlier declines as Brent crude futures rose 1% to $ 84.56 per barrel, helped by expectations of strong demand.

As the Fed is the culmination of this week’s central bank meetings, policy adjustments are possible at the Bank of England and the Reserve Bank of Australia.

Swap pricing portends a better chance that the BoE will rise on Thursday, while the RBA will likely make some sort of adjustment to its guidance after again refusing to defend its return target on Monday.

Oil prices fell as China’s release of gasoline and diesel reserves eased concerns over tight global supply, as investors cashed ahead of a meeting of major crude producers on Thursday that could increase future production targets.

Brent crude rose 1.1% to $ 84.63 per barrel, while US crude rose 0.59% to $ 84.06 per barrel.

Spot gold prices rose 0.6% to $ 1,793.06 an ounce. Bitcoin fell 0.7% to $ 61,949.27.

Reporting by Herbert Lash; additional reports by Danilo Masoni and Tom Westbrook; Editing by Subhranshu Sahu, Andrew Heavens, Barbara Lewis and Marguerita Choy

Our standards: Thomson Reuters Trust Principles.


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