World stocks scale 2-month high boosted by rate cuts bets By Reuters

By Koh Gui Qing and Danilo Masoni

NEW YORK/MILAN (Reuters) – Global stocks extended gains on Wednesday and the dollar stemmed losses as expectations of an end to the global rate-hike cycle boosted investors after subdued inflation figures in the United States and throughout Europe.

Around 15:23 GMT, the MSCI world stock index, which tracks stocks in 49 countries, jumped 0.8% to its highest level since mid-September, after a positive session in Europe and a rally in Asia, helped by a report on stimulus measures in China.

Stocks also rose across the board on Wall Street. The index increased by 0.5%, that added by 0.4% and the index climbed by 0.6%.

U.S. retail sales fell in October, but less than expected, giving some investors reason to celebrate that the U.S. economy is poised for a soft landing and the The Federal Reserve is probably done raising rates.

Recent U.S. data “supports our view that consumer price inflation will continue to fall faster than many expect, even as real economy activity holds up under the weight of higher interest rates.” high,” economists at Capital Economics said in a note.

The pan-European index gained 0.5% after data showed British inflation cooled more than expected in October, hitting sterling and strengthening bets that the Bank of England would cut interest rates. by mid-2024. ()

“The good weather seems to be returning. The market is starting to factor in the possibility of a rate cut in the United States but also in Europe,” declared Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.

“I think the rally in stocks will continue until 2024, just like that in bonds of course, subject to the international situation which remains complicated with the war in Ukraine, the Middle East and trade tensions with China” , he added.

Britain’s consumer price index rose 4.6% in the 12 months to October, a slowdown from the 6.7% rise recorded in September, the Office for National Statistics said. Inflation in Italy and France also fell to an annual growth rate of 1.8% and 4.5% respectively last month, according to their statistical agencies.

On Tuesday, data showed that U.S. consumer prices remained stable in October, compared with an expected rise of 0.1%. The core CPI, at 0.2%, also came in below the forecast of 0.3%.

“I think the CPI number just made the last person cover their shorts,” Naka Matsuzawa, chief macroeconomic strategist at Nomura, said by phone from Tokyo.

He envisions a “more complicated” process ahead, in which stock market exuberance eventually collides with bond market expectations that an economic slowdown would lead to rate cuts.

DOLLAR CREDITS

The dollar stumbled after collapsing on Tuesday following a slowdown in US inflation. The , which measures the currency against a basket of its peers, stood at 104.31, not far from Tuesday’s two-month low of 103.98. [FRX/]

Interest rate futures have swung to price in an interest rate cut by the Fed as early as May, with a 30% chance it could come even sooner, in March.

After falling 19 basis points (bps) on Tuesday, their biggest one-day decline since March, 10-year Treasury yields rebounded to 4.5392%. Ten-year German bond yields stand at 2.639%.

Sterling slipped 0.58% to $1.2431 as slowing inflation helped the British currency reverse some of Tuesday’s rise in the face of a falling dollar. [GBP/] This helped London stocks outperform, up 0.76%. () The euro fell slightly by around 0.2% to $1.086.

SUPPORT FOR CHINA

China’s strong industrial production and retail sales performance plus a Bloomberg News report that China plans to provide 1 trillion yuan ($137 billion) in low-cost financing to boost the real estate market added to the joy of the markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 2.85%, hitting its highest level since mid-September. The amount increased by almost 4% in Hong Kong, with mainland property developers increasing by more than 5%.

Retail sales in China rose 7.6% in October, although this may have been flattered by the Golden Week holiday earlier this month. Real estate remains in a deep crisis, with investments in January-October down 9.3% year-on-year.

“It is clear that Beijing has been more proactive in recent weeks in supporting the recovery,” HSBC economists said in a note to clients. “With continued uncertainties highlighted by the real estate sector, we believe Beijing will continue to strengthen its support through fiscal and monetary means.”

A weak dollar and expectations of more stimulus in China, the metals’ main consumer, kept prices in London close to a five-week high reached in the previous session. [MET/L] Iron ore hit a 2-1/2 year high in Shanghai and was last up 0.8%.

futures reversed trend to trade 0.58% lower at $82.00 per barrel.