Global stocks stabilized on Tuesday, experiencing a slight increase as investor risk appetite improved. However, trading remained cautious due to concerns over the ongoing war in the Middle East and upcoming data that would impact the outlook for US interest rates. The recovery in oil prices was also a cause for market anxiety, with fears that the conflict between Israel and Hamas could escalate and disrupt the crude-exporting region. Bitcoin, on the other hand, continued to surge following its significant rally the previous day, gaining an additional 5%.
The MSCI All-World index saw a 0.1% increase, marking its first daily rise since October 17. Similarly, the Asia-Pacific shares outside Japan index also rose above a one-year low. US stock index futures showed a positive trend, up between 0.6% and 0.7%.
In early October, monthly surveys of business activity indicated a decline in the Eurozone and the UK. This decline was a cause for concern, particularly ahead of a forthcoming report on the United States. Michael Brown, a strategist at TraderX, highlighted that the only significant growth could be seen in the US. He emphasized the importance of the monthly US purchasing manager index (PMI) survey, expecting it to reinforce the message of growth in the country. Brown also expressed concerns about the euro zone, stating that the region would potentially face a second consecutive winter grappling with an energy shock, in addition to existing significant risks.
Despite declines in banking shares such as Barclays, the STOXX 600 index managed to rise by 0.2%, thanks to gains in luxury group LVMH and Swiss computer parts maker Logitech, which raised its full-year guidance and experienced a nearly 8% increase.
As the European Central Bank (ECB) prepares for its meeting this week, investors are not anticipating an increase in interest rates. However, they remain prepared for borrowing costs to remain high for an extended period. The concern over inflation was expressed by Gary Dugan, the Chief Investment Officer of Dalma Capital, who highlighted the imposing specter of inflation, especially considering the recent surge in oil prices. Dugan warned that if oil prices persist at their current level throughout the next few years, it could potentially inject another round of inflation into the global economy.
Global bond yields have been increasing in recent weeks, partly due to the growing belief that central banks will have limited room to cut interest rates until well into 2024. The 10-year Treasury note’s yield rose to 4.865% on Tuesday, reflecting this belief. BlackRock Chief Executive Larry Fink expressed his opinion that US rates would remain high for a longer period due to the substantial fiscal stimulus and robust wage growth in the country.
Investor attention will be divided this week between the earnings reports of high-profile companies, including Microsoft, Facebook’s Meta Platforms, and Amazon, as well as various economic data releases ahead of the Federal Reserve’s meeting from October 31 to November 1. Third-quarter gross domestic product data and the Personal Consumption Expenditures (PCE) report, which is the US central bank’s preferred inflation gauge, could help shape medium-term expectations for US interest rates.
In the currency market, the dollar saw a 0.3% increase against a basket of currencies, partially recovering from a 0.5% drop on Monday. Meanwhile, the yen remained stable against the dollar, but market participants believed it was not far away from reaching 150 per dollar, a level that could prompt Japanese authorities to intervene and support the currency. Against the yen, the dollar remained steady at 149.78.
Bitcoin continued to make significant gains, reaching 18-month highs as speculation about the possibility of an exchange-traded fund generated enthusiasm and prompted short-sellers to exit their positions. The world’s largest cryptocurrency traded as high as $35,198 before settling at $34,717, experiencing an almost 5% increase for the day.
In the commodities market, both Brent crude and US futures rose by 0.5% to $90.24 and $85.88 per barrel, respectively. Copper, on the other hand, saw a slight decline of 0.1% to $7,964 per tonne, after reaching a session high of $8,030 earlier in the day.
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