LONDON: Stock markets extended a global rally Tuesday ahead of US data this week that could be key to the Federal Reserve’s decision-making on interest rates.
Hong Kong and Shanghai enjoyed big gains following fresh promises of help for China’s economy, but worries about the outlook continue to dampen sentiment, with authorities facing growing calls for bigger stimulus to revive growth.
London’s FTSE 100 index jumped 1.4 percent, catching up with strong eurozone gains on Monday when trading in Britain paused for a public holiday.
Gas prices climbed on supply concerns caused by a looming production strike in Australia, and oil futures also rose.
The yen remained weighed down by the Bank of Japan’s refusal to move away from its ultra-loose monetary policy, which has seen it rule out interest-rate hikes despite high inflation.
Goldman Sachs strategists warned that if the BoJ sticks to its guns, then the yen could fall to around 155 per dollar over the next six months, the weakest level since 1990.
After a mainly painful August across trading floors, equities have enjoyed a positive start to the week after Fed boss Jerome Powell’s insistence that monetary policy would be based on a range of indicators fueled hope the rate-tightening cycle has drawn to a close.
This week sees the release of the US central bank’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, as well as jobs creation and factory activity.
“Focus is on US jobs and inflation data out this week for clues into the resilience of the US economy as well as the Fed’s next move,” noted Victoria Scholar, head of investment at Interactive Investor.
While inflation is easing, Fed officials have warned it remains too high at 3.2 percent – and that borrowing costs might have to rise or at least remain elevated until they are satisfied prices have been tamed.
That, however, has led to concerns that they could deal a blow to the economy.
“Investors want to see economic releases this week that suggest activity is slowing enough to keep further rate hikes at bay, but not too slow to indicate the economy is headed for a recession,” said Anthony Saglimbene at Ameriprise.
Key figures around 1100 GMT
London - FTSE 100: UP 1.4 percent at 7,443.94 points
Frankfurt - DAX: UP 0.4 percent at 15,855.52
Paris - CAC 40: UP 0.4 percent at 7,350.72
EURO STOXX 50: UP 0.3 percent at 4,307.18
Tokyo - Nikkei 225: UP 0.2 percent at 32,226.97 (close)
Hong Kong - Hang Seng Index: UP 2.0 percent at 18,484.03 (close)
Shanghai - Composite: UP 1.2 percent at 3,135.89 (close)
New York - Dow: UP 0.6 percent at 34,559.98 (close)
Dollar/yen: UP at 146.83 yen from 146.50 yen on Monday
Euro/dollar: DOWN at $1.0809 from $1.0820
Pound/dollar: DOWN at $1.2591 from $1.2600
Euro/pound: UNCHANGED at 85.85 pence
Brent North Sea crude: UP 0.9 percent at $85.17 per barrel
West Texas Intermediate: UP 0.8 percent at $80.73 per barrel
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