World stocks rose to a five-week high on Wednesday as the possibility arose that the momentum of US interest rate hikes may soon ease.
MSCI’s World Stock Index, which tracks shares in more than 40 nations, climbed to its highest in five weeks and was last trading 0.2% higher.
Global head of markets Chris Turner said the MSCI world equity is now almost 10% off its lows due to some stability in Europe and possibly investors’ significant cash and underweight equity positions.
Asian shares also rallied, with MSCI’s broadest index of Asia-Pacific shares outside Japan surging more than 1%, while Japan’s Nikkei 225 index added 0.7%, having reached its highest level since September 20.
Stocks in European markets traded in the green after a soft start on Wednesday, driven by solid earnings from banks.
German banking major Deutsche Bank AG reported a net income of €1.12 billion ($1.11 billion) for the third quarter, beating analysts’ expectations. British bank Barclays also surpassed forecasts on a trading boom, bringing in pre-tax profit of £2 billion ($2.3 billion) in the three months ending September 30.
Stock Markets Still Not in the Clear
While most expect the Federal Reserve to raise interest rates by another 75 basis points in November, growing hopes that the US central bank may then begin slowing down on its aggressive rate hikes has improved sentiment in the global stock market and reduced the impact of the dollar’s rally.
Still, Turner said it is too early to announce the all-clear for equity markets, as the Fed may take US real rates to restrictive territory, making the greenback’s decline a corrective.
The US dollar index dropped to a three-week low, while the euro returned to the $1 level for the first time in five weeks.
Meanwhile, the Bank of Canada (BoC) is primarily expected to declare another 75-basis-point increase to its rates later in the day to curb high inflation.
Central banks would be raising interest rates, and the risk of recession remains, according to chief economist Shane Oliver.
US data published on Tuesday showed that home price growth in the country slowed in August, rising 13% compared to the 15.6% and 18.1% jump in July and June, respectively.
US consumer confidence also weakened in October, with the Conference Board’s consumer confidence index sliding to 102.5 from 107.8 in the previous month.
