©Reuters. FILE PHOTO: People pass an electronic screen displaying Japan’s Nikkei stock price index in a commercial building in Tokyo, Japan on Sept. 22, 2022. REUTERS/Kim Kyung-Hoon
By Lawrence Delevigne
(Reuters) – Global stocks, oil prices and the dollar rose on Monday as investors awaited the central bank’s latest round of transatlantic rate hikes this year, hoping the now brisk pace of borrowing cost increases will finally show signs of easing.
The price rose by almost 1%, the profit by 0.6% and the increase by about 0.4%. Wall Street’s major indices were boosted by a 2% rise in stocks from Microsoft Corp (NASDAQ:), following the software maker’s plans to acquire a 4% stake in the London Stock Exchange Group (LON:).
After falling for several weeks, oil prices rose as a major crude oil pipeline supplying the United States closed and Russia threatened to cut production, even as China’s easing of COVID-19 restrictions bolstered demand prospects to fuel. [O/R]
The dollar rose slightly as data from last week – showing that US wholesale inflation rose more than expected last month – reinforced ideas that the Federal Reserve may need to keep rates high for longer.
The US consumer price index (CPI) for November is expected on Tuesday, when a slowdown in annual core inflation is expected.
“A risk calendar with heavy events this week will determine the core themes for 2023,” said ING Bank.
According to ING, the market consensus still underestimated the risk of inflation staying high longer and the Fed was dangerously questioned when it comes to rate cuts in the second half of next year.
The MSCI stock index for all countries was nearly flat on the day, still about 18% lower so far this year, wiping out any gains from 2021.
In Europe, the STOXX index of 600 companies fell about 0.5% as investors waited for interest rate movements.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside of Japan fell 1.4%, wiping out nearly all of last week’s gains driven by optimism that China is finally opening up its economy with the dismantling of its zero-COVID -policy. Reduced 0.2%.
CENTRAL BANK WATCH
Economists expect the Fed on Wednesday and the European Central Bank and Bank of England on Thursday to all raise rates by 50 basis points – a slowdown from the 75 basis point increases seen at recent meetings.
Patrick Spencer, vice chairman of equities at investment bank Baird, said central banks will take a less aggressive stance this week, although Tuesday’s CPI data will be crucial.
“It’s the last major week of the year, after this week you don’t have any real catalysts. If the CPI is a muted number, we’ll go to the races and have our year-end rally,” Spencer said.
But regardless of the CPI, deflationary pressures are mounting, with crude oil prices falling for the year, as well as iron ore, lumber and housing, Spencer said.
“All this talk about recession, I think it’s definitely in the price, it’s in the markets. The key to a recession is generally employment, and I think employment is going to be stronger than people believe it to be,” said Spencer.
While the Fed is widely expected to raise rates by 50 basis points at its final meeting of 2022 on Wednesday, the focus will also be on the central bank’s updated economic projections and Fed Chairman Jerome Powell’s press conference.
“This week’s focus will likely be on CPI and the Fed. For us, that’s yesterday’s news,” Morgan Stanley (NYSE:) market strategists wrote in a note Monday.
“While important for… the year-end trading series, the final chapter of this bear market is all about the path of earnings expectations, which we believe are far too high.”
DOLLAR, FLAT BONDS
In the currency markets, it was slightly higher at $105.15, not far from the five-month low of $104.1 a week ago. The euro was also flat at $1.0521.
Interest rates on government bonds also showed little movement. Bond yields rose just 4.2 basis points to 3.609% and 30-year bond yields rose 2.3 basis points to 3.573%. The two-year interest rate, which generally moves in line with interest rate expectations, rose 7 basis points to 4.401%.
rose 2.9% to $73.07 a barrel to stand at $77.84, up 2.3% on the day.
Gold prices fell. fell 1% to $1,779.63 an ounce. The US also fell nearly 1% to $1,780.50 an ounce.