Stock markets pushed higher while the dollar slid against the euro and pound on Monday on returning risk appetite as recession fears eased slightly.
Oil prices jumped over four percent, even though investors continued to fret over Russia’s war in Ukraine, a Covid spike in China and central banks quickly raising interest rates.
“After a volatile week which ended on a high note, the positive momentum has spilled over across the major global markets,” noted Richard Hunter, head of markets at Interactive Investor.
“Investors will nonetheless remain on high alert this week, as further economic data provides further colour, while the need for caution against a further possible supply shock for oil and the likelihood of an interest rate hike from the ECB (European Central Bank) increases.”
Both Asian and European stock markets enjoyed strong gains following a positive session Friday on Wall Street after June retail sales came in above forecasts and banking giant Citigroup’s April-June results beat expectations.
Wall Street continued to move higher on Monday, with investors cheered by investment bank Goldman Sachs posting a big jump in revenue even if profits slid like they did at competitors.
Earnings season continues and investors “will want to be comforted with reassuring earnings guidance” given the concerns about the risk of recession due to rising interest rates to tame inflation.
“That is the key more so than the actual results,” he added.
While a strong set of economic data has of late boosted bets on the US Federal Reserve lifting borrowing costs more, the latest figures were not seen as being large enough to warrant a sharper rate hike next week — easing recession fears.
Market analysts widely expect the US central bank to announce a 75 basis-point lift after its meeting next week, though some have suggested a one percentage-point increase could still be on the cards to try and cool decades-high inflation.
– ECB to act –
The ECB is set on Thursday to raise its interest rates for the first time in more than a decade.
To try and counteract a steep rise in prices, the central bank has said it intends to raise borrowing costs by a quarter point, the first such move since 2011.
The ECB’s delay in acting compared with other central banks that have announced a series of increases — coupled with fears of a eurozone recession — saw the euro fall to parity with the dollar last week.
But on Monday, the European single currency was up around 0.8 percent against the dollar, while the British pound climbed 1.1 percent versus the greenback.
After falling under $100 per barrel last week on recession fears, they jumped back over that level on Monday.
“Oil prices are soaring again today, buoyed by an apparent easing in economic fears, stronger risk appetite and a failure by the White House to get any concrete commitment to increase oil output during the Middle East visit,” said market analyst Craig Erlam at trading platform OANDA.
“When the biggest talking point from President (Joe) Biden’s meeting with Saudi Crown Prince Mohammed bin Salman is a fist bump photo, you know it probably hasn’t gone to plan,” he added.
– Key figures at around 1530 GMT –
New York – Dow: UP 0.4 percent at 31,422.66 points
EURO STOXX 50: UP 1.0 percent at 3,511.86
London – FTSE 100: UP 0.8 percent at 7,218.69 (close)
Frankfurt – DAX: UP 0.7 percent at 12,959.81 (close)
Paris – CAC 40: UP 0.9 percent at 6,091.91 (close)
Hong Kong – Hang Seng Index: UP 2.7 percent at 20,846.18 (close)
Shanghai – Composite: UP 1.6 percent at 3,278.10 (close)
Tokyo – Nikkei 225: Closed for a holiday
Euro/dollar: UP at $1.0166 from $1.0088 on Friday
Pound/dollar: UP at $1.1991 from $1.1865
Euro/pound: DOWN at 84.77 pence from 85.00 pence
Dollar/yen: DOWN at 138.18 yen from 138.54 yen
Brent North Sea crude: UP 4.8 percent at $106.06 per barrel
West Texas Intermediate: UP 4.6 percent at $102.04 per barrel
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