Stocks rise as investors assess monetary policy outlook

US and European stocks rose on Thursday as investors balanced the risks of a global slowdown with central banks’ potential to reduce their plans to raise interest rates.

The S&P 500 up 0.9% on morning trades, putting the U.S. stock threshold on the fourth consecutive day of gains after ending June with The sharpest drop in the first half In more than 50 years. The high-tech Nasdaq Composite rose 1.5 percent.

These moves came as the U.S. Treasury market Continued to flash a warning sign of a recessionWhen the yield on a 10-year note remains below that of the two-year security, in a pattern known as an inverted yield curve.

For most of the current year, financial markets have been dominated by expectations from the major central banks that will quickly tighten monetary policy in response to rising inflation. However, the mood has changed in recent weeks after highlighting Purchasing Managers indices A sharp slowdown in growth in business activity in the eurozone And the Institute for Supply Management reported that new orders and employment in the U.S. manufacturing sector have declined.

“Over the last few weeks, the fears of the recession have been so strong that markets are saying that whatever central banks say, they will not have the track to raise interest rates to the extent that they have indicated they will,” said Tejana Grill Castro, partner-head of public markets at Muzinich & Co. .

Minutes from a meeting of the US Federal Reserve in June showed that its officials felt that tighter monetary policy was needed if inflation – now at a 40-year high – continued to rise.

But since the Fed’s last meeting, investors have lowered their expectations about how much it will cost to raise costs. Futures markets indicate that the Fed is now expected to raise comparative rates to 3.41% in early 2023, down from expectations of 3.9% just over three weeks ago.

Following losses in global stocks from April to June, Citi strategists led by Robert Buckland now forecast a 17% rise in the MSCI World stock index by mid-2023. Weak consumers and inflation.

In Europe, the Stoxx 600 regional stock index rose 1.8%, remaining more than 15% a year to date. The London FTSE 100 added 1.1%.

The euro hovered slightly above its 20-year low against the dollar, after falling to $ 1.016 on Wednesday as the volatility of the recession continued to drive investors to the US currency.

Sterling rose 0.6% against the dollar to just under $ 1.20. British Prime Minister Boris Johnson on Thursday Confirmed he would resign Following the departure of government ministers, however, merchants refrained from betting stronger on the UK economy until his successor was determined. The pound fell to more than a two-year low in the previous session.

Brent crude, which this year found strong support from sanctions against major Russia for its invasion of Ukraine, rose 4.5 percent to $ 105.16 a barrel in busy trading, remaining well below levels of more than $ 120 in mid-June.

In the bond markets, the yield on the 10-year Treasury bill, which is reversed to the price of the comparative bond and strengthens the pricing of loans around the world, stood at 2.97%, down almost 3.5% in mid-June. The two-year Treasury yield, which monitors monetary policy expectations, traded at 3.2%.

Stocks rise as investors assess monetary policy outlook Source link Stocks rise as investors assess monetary policy outlook

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