WASHINGTON/LONDON, Oct 24 (Reuters) – U.S. stocks extended last week’s rally and European shares rose on Monday as signs of a cooling U.S. economy boosted hopes that the Federal Reserve will slow the pace of interest rate hikes.
Dow Jones Industrial Average (.DJI) Up 1.34%, the S&P 500 (.SPX) 1.19% and the Nasdaq Composite gained (.IXIC) It added 0.86%.
The tech-heavy Nasdaq rebounded after a blow from the collapsing Tesla Inc (TSLA.O) shares and as traders expected profit from Apple in the coming days (AAPL.O)Google Home Alphabet (GOOGL.O) and Amazon.com (AMZN.O).
Sign up now for FREE unlimited access to Reuters.com
U.S. business activity contracted for a fourth consecutive month in October, suggesting the Fed’s barrage of steep rate hikes is having the desired effect, raising hopes that the central bank may begin to slow the pace of raising the Fed funds rate target. read more
“Investors are becoming more confident that inflation will come down and that the Fed could take a break soon,” said Edward Moya, chief market analyst at OANDA in New York. “Flash PMIs (purchasing managers’ index data) showed significant weakness in both the services and manufacturing parts of the economy, which is good news for investors who expect the Fed to take a break early next year.”
The dollar rose to 149.70 yen in early trade before retreating, overcoming another suspected Japanese intervention to rally against the yen. Japan likely spent a record 5.4 trillion to 5.5 trillion yen ($36.16 billion to $36.83 billion). his yen buying intervention last Friday, according to calculations by Tokyo money market brokerage firms. Japanese authorities have not confirmed whether there was an intervention.
Sterling saw a choppy trade on news that Boris Johnson was abandoning his bid to become the UK’s prime minister. Finance Minister Rishi Sunak will be the next Prime Minister of Britain after him won the race Leading the Conservative Party could ease some of the political uncertainty hanging over the pound.
Europe’s STOXX 600 index (.STOXX) with utilities up 1.4%, the highest level in nearly a week (.SX6P)the media (.SXMP) and travel and recreation (.SXTP) sectors dominate.
Markets are still pricing in a rate hike of 75 basis points next month, but have reduced bets on a corresponding move in December. The peak rates also fell to 4.87% from above 5% early last week.
Fed officials said the pace of tightening would be at the center of any policy discussion at the November meeting.
Chinese blue chips (.CSI300) It was down almost 3%, while Hong Kong shares fell 6.4%, the biggest one-day drop since the financial crisis. After that, the offshore yuan fell to another record low against the dollar Xi Jinping secured an unprecedented third leadership term, electing a high governing body packed with loyalists. Analysts say Xi will stick to a zero-growth COVID policy.
Late date Gross Domestic Product (GDP) showed China’s economy grew 3.9% in the third quarter, beating forecasts of 3.5%, but retail sales disappointed with a 2.5% increase.
Investors will look to US GDP on Thursday and key inflation measures a day later. The economy is projected to grow 2.1% annually in the third quarter.
The European Central Bank meets this week and is widely expected to raise interest rates by 75 bps.
The euro last traded at $0.98640 and briefly rose to $0.9899 earlier in the session.
The Bank of Canada is expected to do the same Compress at 75 bps at its meeting this week.
In Treasury markets, traders shrugged off a slowdown in business activity data, worried that the Fed would maintain its ultra-hawkish stance on the fight against inflation. Productivity has risen.
US 10-year Treasury yields last traded at 4.2508%, down 4.337% from a 15-year peak on Friday.
In commodities, gold prices were under pressure from a strong dollar and higher US bond yields. US gold futures
Brent crude oil futures fell 0.3% to $93.26 a barrel, while US West Texas Intermediate crude futures fell 0.6% to $84.58 on weaker demand from China and a stronger US dollar.
Sign up now for FREE unlimited access to Reuters.com
Reporting by Chris Prentice in Washington and Amanda Cooper in London Additional reporting by Amruta Khandekar, Devik Jain and Wayne Cole Editing by Nick Macfie, Will Dunham and Matthew Lewis
Our standards: Thomson Reuters Trust Principles.
