© Reuters. A man walks under an electronic screen displaying Japan’s Nikkei stock price index inside a hall in Tokyo, Japan June 14, 2022. REUTERS / Issei Kato
By Huw Jones
LONDON (Reuters) – Strong gains at Credit Agricole (OTC:) and Lufthansa lifted shares on Thursday as tensions over Nancy Pelosi’s visit to Taiwan eased and the Bank of England bet markets will raise interest rates by the largest amount since 1995 to quell inflation.
The STOXX index of leading European companies rose 0.33% after German airline Lufthansa returned to profitability, while French bank Credit Agricole joined a growing list of better-than-expected earnings. waiting at banks.
Shares in Hong Kong rose 2%, tracking gains more broadly in Asia, reeling from some of the damage suffered after Sino-US friction flared up during House Speaker Pelosi’s visit to Taipei this week. , angering China.
Oil prices recovered from six-month lows, while the dollar was bolstered by US Federal Reserve officials pushing back against suggestions they would slow the pace of rate hikes, with some for that a 50 basis point increase is “reasonable”. After the Fed and the European Central Bank raised interest rates massively to stave off a decade-long rally in prices, investors expect the Bank of England to follow suit with a 50-basis-point increase when it releases its poll results. monetary policy meeting at 11:00 GMT.
Sterling could struggle in the absence of hawkish surprises – especially as the UK economic outlook looks weak while US data offers some bullish surprises.
The British pound was trading at $1.2162, up slightly on the day. [GBP/]
“Everybody is leaning towards a 50 basis point increase, a divisive decision,” said Michael Hewson, chief market analyst at CMC Markets.
“The UK economy is going into recession and there’s nothing they can do to fix it and the Bank of England’s main focus should be on pulling inflation down from its current levels and burden like the Fed is doing.” , Hewson said.
A survey from the European Central Bank shows that consumers in the euro area are bracing for an economic contraction and continued high inflation.
Little was changed from the Wall Street open, with Friday’s nonfarm payrolls a key piece of data for the week.
Image: Central Bank Policy – https://fingfx.thomsonreuters.com/gfx/mkt/byprjyonrpe/One.PNG
NO RESETIBLE INCOME
Kasper Elmgreen, head of equities at asset manager Amundi, said the illusion that decades-high inflation would be temporary is now gone as fuel bills rise and companies Difficulty finding staff.
“The big picture here is that it will take quite a bit to restore price stability. The risk here is that we underestimate the strength of the force we are dealing with,” Elmgreen said.
The now ongoing second-quarter earnings season has failed to provide a major “reset” to what Elmgreen considers to be still too high overall earnings expectations for 2022 amid a slowing economy.
“I think that could come in Q3 or Q4 when we start to see demand impact more,” Elmgreen said.
An ISM survey on Wednesday showed the US services sector unexpectedly rallied in July, leading to a sell-off in bonds and rallies in US stocks and the dollar, with the Nasdaq up 2. .5% to a three-month high.
Fed officials delivered a hawkish chorus this week, beating the short end of the yield curve. The yield on the two-year Treasury note traded at 3,1040%, while the underlying 10-year yield traded at 2.7318%, both slightly weaker.
The dollar capped the decline that began in mid-July, with support from both bullish expectations and rising political tensions. [FRX/]
Fed funds futures are still priced for a rate cut to be delivered mid-next next year and an inversion of the US yield curve, with 10-year yields below two-year yields, suggesting investors think that the growth path will affect growth.
“I think the market will continue to change,” said David Ratliff, head of banking and capital markets Asia Pacific. Wells Fargo (NYSE:) in Hong Kong. “People are starting to read through the current round and the pace of Fed tightening.”
Trading at 106.30, down 0.169%. One euro weighed by Europe’s energy crisis bought $1.0185.
Futures were slightly weaker at $96.75 a barrel as supply concerns triggered a rebound from multi-month lows on Wednesday after US data showed fuel demand. feebleness.
rose 0.5% to $1,773 an ounce.