European and Asian stocks benefited from overnight Wall Street rally

Asian and European stocks rallied on Tuesday after Wall Street soared overnight, buoyed by hopes that weaker US economic data would prompt a shift in global central bank policy.

Europe’s regional Stoxx 600 index rose 1.4 percent at Tuesday’s open and Germany’s Dax rose almost 2 percent. In Asia, the Japanese Topix rose 3.2 percent. Futures contracts, which track the S&P 500, gained 1.1 percent after the broad US index closed 2.6 percent on Monday.

Monday’s rally was the biggest daily gain for US stocks since August, with the tech-heavy Nasdaq Composite gaining 2.3 percent.

The renewed optimism in equity markets comes after a difficult third quarter ended in which persistently high inflation data prompted sharp rate hikes from the world’s major central banks and weighed on equities.

The optimistic mood largely stems from “growing speculation that central banks may soon turn to a more dovish stance,” analysts at Deutsche Bank wrote after data on Monday showed US manufacturing activity came in lower-than-expected in September, suggesting a US slowdown suggests economy.

In a sign central bankers may back off aggressive interest rate moves, the Reserve Bank of Australia hiked interest rates 0.25 percentage point to 2.6 percent on Tuesday, below consensus forecast of a 0.5 percentage point hike.

Meanwhile, the recent turmoil in UK markets has eased, where last week’s announcement of unfunded tax cuts sparked a spiral in borrowing costs. The pound rose 0.6 percent on Tuesday to its highest level in a fortnight against the dollar, touching $1.14.

The 10-year government bond yield, which rises as prices fall, fell 0.09 percentage points to 3.86 percent on Tuesday as traders await more details on funding their budget plans.

British Chancellor Kwasi Kwarteng will bring forward the release of his debt reduction plan and will release details later this month instead of the previously scheduled November 23 date. Long-term borrowing costs, however, remain above the 3.5 percent level recorded before Kwarteng’s “mini” budget.

Elsewhere in government bond markets, government bonds rose, with the 10-year German Bund yield falling 0.07 percentage point to 1.82 percent and the 10-year government bond yield falling 0.06 percentage point to 3.6 percent.

https://www.ft.com/content/0cabef45-fccd-4c8d-a829-4291d9c5629b European and Asian stocks benefited from overnight Wall Street rally

Adam Bradshaw

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