LONDON/BEIJING—World shares hit a three-week high on Wednesday as strong U.S. corporate earnings and the expected resumption of Russian gas supply to Europe allayed fears of a recession, though the dollar hovered near two-week lows on lower U.S. rate hike expectations.
Markets still expect a large 75-basis-point interest rate rise from the U.S. Federal Reserve next week to rein in white-hot inflation. But this represents a rowback from previous expectations of 100 bps.
S&P 500 futures and Nasdaq futures both rose more than 0.4 percent, after stronger-than-expected results from U.S companies overnight including Netflix Inc.
The S&P 500 gained 2.8 percent on Tuesday while the tech-heavy Nasdaq Composite added 3.1 percent.
MSCI’s world stock index gained 0.36 percent after rising 2 percent on Tuesday.
European stocks were steady and Britain’s FTSE 100 rose 0.54 percent, lifted by oil and mining stocks and shrugging off data showing UK inflation at a new 40-year high.
The euro gained 0.14 percent to $1.0236, after racking up its biggest one-day percentage gain in a month in the previous session on rising rate hike bets.
The dollar was steady at 106.67 against an index of currencies, close to two-week lows hit in the previous session.
“A further bounce in risk assets is quite possible but we think it is too early to shift from a defensive stance. The greenback will likely remain on the front foot into 3Q22.” said Sim Moh Siong, senior currency strategist at Bank of Singapore.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1 percent, driven by a 1.65 percent jump in resources-heavy Australia and 1.4 percent gain in Hong Kong stocks. Japan’s Nikkei surged 2.67 percent.
Chinese shares rose 0.34 percent, lagging gains in other markets, as the central bank kept its benchmark lending rates unchanged amid a shaky economic recovery from COVID-19 lockdowns.
The Bank of Japan also delivers a policy decision on Thursday, but is not expected to make any changes to its ultra-easy stance.
A closely-watched part of the U.S. yield curve remained inverted, with the two-year yield last at 3.1979 percent, down from the previous close of 3.2310 percent.
The yield on benchmark 10-year Treasury notes stood at 2.9874 percent, compared with its close of 3.019 percent on Tuesday.
German 10-year bond yields fell 4 bps to 1.235 percent.
Oil prices slumped more than $1 a barrel, pressured by global central bank efforts to tame inflation and ahead of expected builds in U.S. crude inventories as product demand weakens.
U.S. crude fell 1.75 percent to $102.40 a barrel while Brent crude dropped 1.5 percent to $105.73 per barrel.
Spot gold eased 0.2 percent to $1,708 an ounce.
By Carolyn Cohn and Stella Qiu