With traders now resigned to fewer rate cuts this year, they are also focusing on readings showing that US growth remained on track and jobs were still being created, all as inflation came down
Stocks mostly rose Thursday following another record on Wall Street, with strong earnings, a resilient US economy and Chinese moves to boost the country’s markets playing up against fading hopes for an early Federal Reserve interest rate cut.
Fresh comments from US monetary policymakers pushing back against reducing borrowing costs too early were unable to overshadow a string of forecast-beating reports from top firms this season including Amazon and Facebook parent Meta.
With traders now resigned to fewer rate cuts this year, they are also focusing on readings showing that US growth remained on track and jobs were still being created, all as inflation came down.
In the latest moves to temper bets on a dovish Fed pivot, the bank’s Richmond president Tom Barkin said he was “very supportive of being patient” on announcing the first reduction, citing the strong metrics.
And governor Adriana Kugler added that she wanted to wait until more data was available before moving.
While figures continue to show the inflation battle is being won, decision-makers are reluctant to cut too early in case prices bounce back.
Still, New York traders were in a good mood, helped by healthy results from Disney, auto giant Ford and Chipotle Mexican Grill.
That helped the S&P 500 push to a new all-time high within a whisker of the 5,000-point mark, while the Nasdaq and Dow were also well up.
“Higher rates don’t appear to burden consumers or corporations significantly, enabling the Fed to wait longer to ensure inflation control without disrupting the stock market’s momentum,” said Stephen Innes at SPI Asset Management.
“It’s becoming increasingly evident that equities are unfazed and indifferent to the Federal Reserve’s less dovish stance, which suggests that unless there is a substantial deterioration in the labour market, the central bank’s baseline expectation for 2024 includes three rate cuts.”
Asia fluctuated, though Shanghai was again sharply higher heading into the Lunar New Year break.
The market built on the almost five percent gains over the previous two days as investors cheered a number of pledges from Beijing to staunch a long-running rout.
– ‘A new broom’ –
There was also positive reaction to news that the chairman of China’s securities regulator, Yi Huiman, had been replaced after overseeing a sell-off that has wiped trillions off companies’ valuations.
He will be replaced by banking veteran Wu Qing.
“This is long overdue in my opinion, if one chief cannot do the job, then maybe we should give someone else a chance,” Jiang Liangqing, of Zhuhai Greenbamboo Private Fund Management, said.
“At the minimum, a new broom sweeps clean and he could be more bold in taking action instead of just words.”
Shujin Chen of Jefferies Financial Group added that the decision “signals more attention to capital markets” by President Xi Jinping.
The announcement follows a series of measures and pledges aimed at boosting confidence on trading floors, including curbs on short-selling purchases by state-owned enterprises and share-buying by China’s “national team”.
Still, observers warned the moves would not solve the country’s deeper economic problems — particularly in the property sector — which needed to be addressed to fully restore optimism.
“Consumer and business sentiment in China… needs to improve significantly to inspire major multi-month bullish trends to kickstart in the China and Hong Kong stock markets, where the required catalysts are direct fiscal stimulus measures to boost spending which are lacking at this juncture,” said OANDA’s Kelvin Wong.
Data showing China’s consumer prices fell for a fourth straight month in January — and at the sharpest pace since 2009 — highlighted the hard work leaders face in turning the ship around.
There were also gains in Tokyo, Sydney, Seoul and Manila, while London, Paris and Frankfurt opened higher.
Singapore, Mumbai, Bangkok and Wellington dropped.
Hong Kong was dealt a blow lower by a more than six percent dive in market heavyweight Alibaba, which was hit by a worse-than-expected earnings report that overshadowed a huge stock buyback.
– Key figures around 0810 GMT –
Tokyo – Nikkei 225: UP 2.1 percent at 36,863.28 (close)
Hong Kong – Hang Seng Index: DOWN 1.3 percent at 15,878.07 (close)
Shanghai – Composite: UP 1.3 percent at 2,865.90 (close)
London – FTSE 100: UP 0.2 percent at 7,642.80
Dollar/yen: UP at 148.73 yen from 148.16 yen on Wednesday
Pound/dollar: UP at $1.2629 from $1.2628
Euro/dollar: UP at $1.0780 from $1.0777
Euro/pound: UP at 85.37 pence from 85.32 pence
West Texas Intermediate: UP 0.5 percent at $74.20 per barrel
Brent North Sea Crude: UP 0.5 percent at $79.57 per barrel
New York – Dow: UP 0.4 percent at 38,677.36 points (close).
Source: Zawya
