As the dollar’s slide bolstered commodities and pressed Treasury yields on Wednesday, U.S. shares were mixed and global stocks slipped off a five-week high.
Interest hike
Investors contrasted the Federal Reserve’s aggressive interest rate hike schedule against the disappointing results from American giants.
The pound reached its highest point since September 13 as it continued to rise after Rishi Sunak was elected prime minister of Britain. Bond yields increased following the announcement that the British government’s plan to restore the nation’s public finances will now take place on November 17 rather than November 10.
Economy fizzles
The Dow Jones Industrial Average (.DJI) closed a hair higher, rising 0.01%. The S&P 500 (.SPX) lost 0.74% and the Nasdaq Composite (.IXIC) dropped 2.04%, dragged by disappointing earnings and warnings from Microsoft Corp (MSFT.O) and Alphabet Inc (GOOGL.O).
MSCI’s World Stock Index (.MIWO00000PUS) was lower after touching a five-week high. Europe’s Stoxx 600 (.STOXX) finished up 0.7% at its strongest level since Sept. 20.
Some of Europe’s largest banks warned of growing risks as the economy fizzles after they posted stronger-than-expected profits, helped by a trading boom in volatile markets and higher interest rates. Deutsche Bank (DBKGn.DE) posted a better-than-expected jump in third-quarter profit, and Britain’s Barclays (BARC.L) also beat profit forecasts.
Optimism
Google owner Alphabet posted softer-than-expected ad sales after Tuesday’s close and Microsoft missed revenue forecasts, while a warning from Dutch semiconductor supplier ASM (ASMI.AS) added to concerns about slowing economic growth.
U.S. new home sales decreased 10.9% and mortgage rates reached their highest level in 20 years last week, data showed.
Although the Fed is widely expected to deliver another 75 basis-point hikes in November, a sense that it could then start to slow its aggressive tightening cycle has lifted sentiment in share markets and taken the edge off a dollar rally.
“I wouldn’t want to take the optimism too far.”
Sheets also noted “more downside risk” for earnings.
Bank of Canada
The Bank of Canada, meanwhile, announced a smaller-than-expected rate rise of 50 percentage points.
That put its policy rate at 3.75%, a 14-year high but coming up short on calls for another 75 basis-point move to contain stubbornly high inflation.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rallied more than 1%, while Japan’s Nikkei (.N225) hit its highest level since Sept. 20.
The euro pushed back above $1 for the first time in five weeks.
China’s yuan rebounded sharply to close the domestic session at the strongest level in two weeks, as traders and corporate clients raced to liquidate long dollar positions.
Weaker dollar
Market participants became cautious after major state-owned banks were spotted selling the dollar on Tuesday to stabilize the market, traders said.
U.S. Treasury yields fell, helped by a weaker dollar and Fed hopes.
The weaker greenback also boosted commodities, making them less expensive to holders of other currencies.
Spot prices touched a two-week high and were last up 0.65%.
U.S. gold futures settled up 0.7% at $1,669.20.
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Source: Reuters
