European Stocks Rise as Markets Await US Inflation Data
European stocks saw gains on Tuesday as global markets braced for the release of US inflation data later in the day. The data is expected to provide insight into whether global interest rates may start to fall. The MSCI World Equity index rose 0.1 percent to 667.98 at 1124 GMT. Asian stocks also saw a slight increase, with the MSCI’s broadest index of Asia-Pacific shares outside Japan set for a second consecutive day of gains.
Meanwhile, the pan-European STOXX 600 saw a marginal increase of less than 0.1 percent, while Germany’s DAX rose 0.4 percent. However, the FTSE 100 experienced a decrease of 0.4 percent. Wall Street is anticipated to open higher, with Nasdaq futures up 0.2 percent and S&P 500 futures up 0.1 percent.
The Israel-Hamas conflict had made traders risk-averse in October. However, world stocks have shown a recovery of almost 5 percent this month as investors bet that major central banks have concluded a series of interest rate hikes. Despite this, US Federal Reserve Chair Jerome Powell and other policymakers remain uncertain whether interest rates are high enough to control inflation.
US Treasury yields and Eurozone government bond yields both decreased. The 10-year US Treasury yield was at 4.6201 percent, while the benchmark 10-year German yield stood at 2.708 percent. In an interview over the weekend, European Central Bank President Christine Lagarde stated that no change in interest rates should be expected in the “next couple of quarters” when asked about the duration rates would need to remain high to combat inflation.
Official data released on Tuesday reveals that wages in Britain grew slightly less quickly in the three months to September. The Bank of England has been on alert for inflation following a previous record pace of wage growth. In addition, a new estimate has confirmed that the eurozone economy contracted marginally quarter-on-quarter in Q3. This further highlights expectations of a technical recession if Q4 is equally weak, although employment did see an increase.
US consumer price inflation data for October is scheduled for release at 1330 GMT. Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, highlighted the significance of the bond market. A higher inflation figure could potentially reverse the recent trend and cause bond yields to rise, adding pressure to equities and risk assets. On the other hand, a weaker print may extend the rally that has been observed.
In the currency market, the US dollar index saw a slight decrease of less than 0.1 percent, standing at 105.58, while the euro rose 0.2 percent to $1.07185. The yen remained near its lowest level in three decades against the dollar, struggling to find stability as the Bank of Japan’s ultra-easy monetary policy settings are at odds with the possibility of higher-for-longer rates elsewhere. The pair was around 151.725, with the yen recovering slightly from Monday’s 151.92.
Oil prices experienced a slight increase after the International Energy Agency (IEA) raised its demand growth forecasts. This added to the bullish sentiment following OPEC’s guidance from the previous day. Brent crude futures were at $82.63 a barrel, while WTI crude futures stood at $78.41.
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