Global stocks rose on Monday as traders lowered expectations of how high U.S. central bank interest rates would be and after reports of Chinese aid to struggling property developers.
On Wall Street, the S&P 500 was up 0.8% in early New York afternoon and the technology-focused Nasdaq Composite was up 1.4%. The S&P has fallen 18% this year.
The European Stoxx 600 stock index gained 0.9%. A broad FTSE index of Asia-Pacific stocks rose nearly 2% after Chinese state media reported that regulators in Beijing were urging banks to finance developers following a boycott by property owners on the mortgage payments on unfinished homes.
The moves followed a bullish session for U.S. stocks on Friday, as strong retail sales data and a survey hinting at easing inflation expectations tempered concerns over the Reserve’s aggressive monetary tightening. federal government in an economic downturn.
Futures markets reflected bets on Monday that the Fed would raise its main interest rate by 0.75 percentage points this month, from a current range of 1.5% to 1.75%.
Last week, after data showed U.S. consumer price inflation hit a 40-year high of 9.1%, markets briefly priced in a whopping 1 percentage point increase in the funds rate.
“The market is weak and when you get some less bad news, the market enjoys a moment of relief,” said Roger Lee, head of UK equity strategy at Investec.
However, he added that high inflation and the potential for recession in the United States and Europe meant global stocks could fall further, despite the FTSE All World stock index falling by a fifth this year.
“I don’t think investors fully appreciate that the performance you’ve seen in equities so far this year is purely interest rate driven, it has nothing to do with potential downgrades to earnings as we enter a downturn,” Lee said.
Swiss investment group GAM and food delivery platform Deliveroo issued earnings warnings on Monday. Direct Line also slashed its earnings forecast, citing used-car price inflation as driving up the cost of paying motorist claims and driving its shares down 11%.
In the currency markets, the dollar index fell 0.8% as traders cut bets on rising rates.
The euro, which fell below $1 last week for the first time in 20 years, rose 0.8% to $1.017 ahead of a meeting of the European Central Bank on Thursday, at which it is expected to rise. its deposit rate for the first time since 2011 to combat record inflation.
The yield on the 10-year German Bund, a barometer of the cost of eurozone debt, gained 0.09 percentage points to 1.16%.
The yield on Italian 10-year bonds rose 0.02 percentage points to 3.29%. Bond yields rise as their prices fall.
Yields on US Treasuries also rose, with the benchmark 10-year yield rising 0.07 percentage points to 3%. This key debt yield, which sets loan prices globally, was trading at around 3.5% just over a month ago.