TOKYO/MUMBAI : Global shares gained on Wednesday and the dollar steadied ahead of key U.S. inflation data which could impact the Federal Reserve’s policy outlook, while geopolitical uncertainty lifted oil prices and kept gold near record highs.
The pan-European STOXX 600 rose 0.5 per cent, taking the baton from gains in Asian stocks where Japan’s Nikkei added 0.9 per cent while Hong Kong’s Hang Seng gained over 1 per cent.
European shares were led higher by gains in Spanish fast-fashion giant Inditex and Novo Nordisk which rose following the Wegovy maker’s announcement of restructuring steps, including job cuts.
MSCI’s gauge of global equities nudged higher while equity futures pointed to a positive start for shares on Wall Street as well, a day after the S&P 500 and Nasdaq posted new record closing highs.
Buoyant equities and steady currency markets appeared to largely sidestep geopolitical worries spurred by Israel’s attack on Hamas leadership in Qatar on Tuesday and after Poland scrambled its own and NATO air defences to shoot down drones following a Russian air attack on western Ukraine.
Poland’s blue-chip index was down 2 per cent, one of few regional indices in the red in Europe.
“The Pavlovian response of investors has been to fade geopolitical risk,” said Ben Laidler, head of equity strategy at Bradesco BBI, referring to pullback spurred by previous geopolitical flare ups that proved to be attractive entry points for investors.
The broader market sentiment remains bullish despite multiple risks and some of that could be finding an expression in hedges via gold, Laidler said.
Gold lingered close to its record high hit in the previous session. It was last up 0.5 per cent at $3643.92 per ounce. It has risen over 5 per cent over September so far, also helped along by firming of Fed rate cut wagers.
Traders see a rate cut by the Fed next Wednesday as a sure thing, and even lay 8 per cent odds on a super-sized half-point reduction, the CME Group’s FedWatch Tool shows.
A week earlier, markets had assigned a 7 per cent probability on the Fed holding rates steady, but another dismal monthly payroll number last week convinced investors the Fed had no cushion to wait any longer to support the economy.
The final hurdles to that view will come on Wednesday and Thursday, in the form of producer and consumer inflation readings, respectively.
Analysts reckon that an upside surprise could spur investors to lighten bets on rate cuts later this year but is unlikely to meaningfully change expectations for September.
Markets took in their stride a court ruling that temporarily blocked President Donald Trump from removing Federal Reserve Governor Lisa Cook, a case which is likely to end up before the Supreme Court.
Investors are keenly following the legal battle as it could upend the central bank’s long-held independence.
U.S. Treasury bonds declined for a second day on Wednesday, pushing yields higher. The 10-year Treasury yield ticked up to 4.0836 per cent, after climbing almost 3 basis points on Tuesday. Bond yields rise when prices fall.
The focus this week is also on the European Central Bank’s policy decision due on Thursday. It is widely expected to keep rates unchanged.
A month ago, economists were split on the likelihood of further rate reductions by the ECB, but sentiment has shifted with recent data showing inflation holding close to the 2 per cent target and unemployment at a record low.
“We see slightly negative euro risks around the ECB’s September meeting, with our economists expecting a slightly dovish press conference, also given ECB market pricing. But we would not expect this meeting to be much of an event for FX,” analysts at BofA Global Research said in a note.
The euro was last steady at $1.1705. The U.S. dollar index, which measures the currency against six rivals, eased slightly to 97.78, paring earlier small gains.
In commodities, Brent crude futures rose 0.7 per cent to $67 a barrel, while U.S. West Texas Intermediate crude futures gained 0.8 per cent to $63.13.
Prices had settled up 0.6 per cent in the previous trading session after Israel said it had attacked Hamas leadership in Doha, which Qatar’s prime minister said threatened to derail peace talks between Hamas and Israel.
