December 9, 2022

Global stocks break from November 2020 lows, sterling regains some of its gains

Global stocks break from November 2020 lows, sterling regains some of its gains

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  • The dollar is retreating from a 20-year high reached on Monday
  • German 10-year bond yields are near 11-year highs
  • Oil rises from nine-month lows on Monday

LONDON/HONG KONG (Reuters) – Global stocks rebounded on Tuesday from 21-month lows and the pound rose after hitting record lows against the dollar the previous day on the back of the United Kingdom’s plans to cut taxes, as market slumps ran out of momentum.

US S&P futures rebounded 0.94% after Wall Street plunged deeper into a bear market on Monday, 10-year Treasury yields fell from a 12-year high in the previous session and the dollar slipped from 20-year highs on a basket of currencies.

However, markets remained nervous after Federal Reserve officials said on Monday that their priority remained controlling domestic inflation. Read more

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“US interest rate expectations have increased quite a bit,” said Andrew Hardy, chief investment officer at Momentum Global Investment Management, although he added that “there is a huge amount of downside already priced in the markets.”

Markets are pricing in a 76% probability of a further 75 basis point move at the Federal Reserve’s next meeting in November.

Among the central bank speakers on Tuesday are Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde.

MSCI World Stock Index (.MIWD00000PUS) It rose 0.29% after hitting its lowest level since November 2020 on Monday. European shares rose more than 1% and Britain’s FTSE index (.FTSE) It rose 0.6%.

Sterling collapsed to a record low of $1.0327 on Monday as government tax cut plans announced on Friday came on top of massive energy subsidies.

The British currency recovered 4.6% from that low to $1.0801 on Tuesday.

After the pound fell, the Bank of England said it would not hesitate to change interest rates and was watching the markets “closely”. Read more

BoE Chief Economist Hugh Bell will speak at a session at 1100 GMT.

A lack of confidence in the government’s strategy and financing also weakened government bonds on Friday and again on Monday.

The yield on five-year US Treasuries rose by as much as 100 basis points in two trading days, although down from Tuesday’s highs.

“(It’s) definitely something unfolding…We may only be at a certain initial stage of seeing how the market absorbs that kind of information,” said Yuting Chao, a macroeconomic analyst at State Street Global Markets.

“Of course the tax cuts plan itself was really aimed at stimulating growth and reducing household burdens, but it raises the question about the implications for monetary policies.”

The fallout from Britain has kept other assets on edge.

The bond sale in Japan pushed yields to the BOJ ceiling and prompted more unscheduled purchases from the central bank in response.

The German 10-year bond yield briefly reached a new 11-year high of 2.142%.

US 10-year yields fell 3.2 basis points after hitting a high of 3.933% on Monday.

MSCI’s broadest index of Asian stocks outside Japan (MIAPJ0000PUS.) It reached its lowest level in two years before rebounding by 0.5%. Japan’s Nikkei Index (.N225) It rose 0.5%.

The dollar index fell 0.13 percent to 113.72 after touching 114.58 on Monday, its strongest level since May 2002.

The European single currency was up 0.24% on the day at $0.9629 after hitting a 20-year low the day before.

Oil rose more than 1% after falling to a nine-month low the previous day, amid indications that the OPEC+ producer alliance may enact production cuts to avoid a further crash in prices.

US crude rose 1.4 percent to $77.70 a barrel. Brent crude rose 1.27 percent to $85.20 a barrel.

Gold, which hit a two-and-a-half-year low on Monday, gained 0.8% to $1,634 an ounce.

Bitcoin broke above $20,000 for the first time in about a week, with the cryptocurrency rebounding, along with other risk-sensitive assets. Read more

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Reporting by Xie Yu; Editing by Edmund Kelman, Muralikumar Anantharaman and Raisa Kasulowski

Our criteria: Thomson Reuters Trust Principles.