On Tuesday, global share markets shook as investors weighed excellent profits from big-name US businesses against mixed economic data and inflation concerns as the month began.
While job vacancies in the United States surged to near record highs in December, a measure of manufacturing activity in the United States dipped to a 14-month low in January amid a COVID-19 epidemic, bolstering claims that economic growth slowed at the start of the year. find out more
A pan-European market index (.STOXX) jumped 1.28 percent, while Japan’s blue-chip Nikkei (.N225) rose 0.28 percent. MSCI’s world stock index rose 0.85 percent after reaching its highest level in almost a week.
The Dow Jones Industrial Average (.DJI), the S&P 500 (.SPX), and the tech-heavy Nasdaq Composite (.IXIC) all ended the session higher, with the Dow Jones Industrial Average (.DJI) up 0.78 percent, the S&P 500 (.SPX) up 0.69 percent, and the Nasdaq Composite (.IXIC) up 0.75 percent.
On Monday, policymakers at the Federal Reserve of the United States appeared to confirm that interest rates will rise in March, but they were cautious about what might happen next. find out more
On Tuesday, Australia’s central bank added its two cents. It completed its A$275 billion ($194.40 billion) bond-buying program as planned, but resisted market rate-hike bets.
Investor worry over prospective U.S. central bank rate hikes had previously wiggled and drifted downward, sending global markets lower. Global equities had their worst month in January since March 2020, at the peak of the first wave of the global financial crisis.
Money markets are pricing in five quarter-point Fed rate hikes this year, but recent statements have cast doubt on that forecast.
“The price activity from the previous month is still being digested by investors. The Fed’s hawkish move to raising rates more swiftly rather than allowing the economy to run hot and leaving rates at zero prompted a broad re-pricing of stocks and bonds “Independent Advisor Alliance’s chief investment officer, Chris Zaccarelli, stated.
“Now that they’ve admitted there’s an issue with inflation, they’re acting more quickly to address it.”
Last month, the Institute for Supply Management (ISM) reported that its national industrial activity indicator fell to 57.6, the lowest level since November 2020. find out more
For the Lunar New Year holidays, a number of Asian markets, notably China, were closed.
Major bourses from London to Paris and Frankfurt were up as much as 1%, with UBS, a Swiss bank, providing the biggest lift, thanks to excellent fourth-quarter earnings.
In a note, JPMorgan analysts stated, “The equities market sell-off is excessive in our opinion, and we reaffirm our suggestion to buy the dip, particularly in cyclicals and small caps.”
RETREATS FOR OLIVE OIL
Oil prices remained stable as geopolitical tensions and limited global supplies underpinned the market, despite speculation that the Organization of Petroleum Exporting Countries and Allies (OPEC+) would increase supply more than expected.
Brent crude fell 10 cents, or 0.1 percent, to $89.16 a barrel, while West Texas Intermediate crude climbed 5 cents to $88.20.
Government borrowing costs have fallen after rising on Monday.
On Tuesday, the bond market sell-off that has thrown financial markets into a loop since the beginning of the year came to a halt, with benchmark 10-year Treasury rates sitting near their lowest levels in a week.
Treasury yields, which move in the opposite direction of prices, surged at their highest rate since 2009 in January as investors began pricing in the potential of the Fed raising interest rates five times this year.
The European Central Bank is expected to raise rates by 10 basis points twice by the end of the year, with a third hike possible.
This could cause a headache for ECB policymakers meeting on Thursday, as they had previously stated that interest rates are unlikely to rise in 2022.
The Australian dollar has recovered in currency markets after taking a hit from the Reserve Bank of Australia’s dovish stance.
After hitting a 19-month high at the end of last week, the dollar sank for a second straight day on weaker-than-expected US economic data and after Fed policymakers pushed back against rapid rate hikes this year, boosting risk appetite.
Risk-sensitive currencies such as the Australian dollar, euro, and British pound rose as the dollar fell. The dollar index dropped 0.3%, while the euro rose 0.19 percent to $1.1254.
Russia’s rouble strengthened to around 77 per dollar, regaining ground after a sharp drop last month due to rising tensions between Moscow and the West.