Stocks are back higher as investors assess the prospects for a rate hike

Global equities turned higher on Thursday, continuing their week-to-date rise as investors sought opportunities to cut prices after three straight quarters of stock declines.

A FTSE measure of global equities was up 0.3 percent, with Europe’s regional Stoxx 600 rising 0.8 percent in early London trade. Futures contracts, which track Wall Street’s S&P 500, edged up 0.2 percent.

The broad S&P closed down 0.2 percent on Wednesday, trimming steeper losses from earlier in the session in a brief pause after an upbeat start to the new month. On Monday and Tuesday, U.S. stocks posted their strongest two-day rise since the pandemic’s lows more than two years ago — buoyed by cautious optimism among market participants after the longest streak of quarterly declines since the 2008 financial crisis.

Stocks have sold off this year as central banks, led by the US Federal Reserve, tighten monetary policy to curb persistently high inflation. Concerns have mounted in recent months that the Fed and its peers will raise interest rates into a protracted slowdown and squeeze demand enough to trigger a global recession.

Against this backdrop, investors have been scrutinizing economic reports and data releases for clues as to how much more rate-setters can push up borrowing costs as growth dwindles.

A worse-than-expected US jobs report on Tuesday had eased concerns about rate hikes and fueled a rally in Wall Street stocks at the start of the new month. The heat in the jobs market is widely seen as a key influence on Fed decision-making, with signs of weakness raising hopes that the central bank will act with less force to contain inflation.

New data on Thursday will give further clues to the level of unemployment in the world’s largest economy, with 203,000 initial jobless claims expected for the week ending October 1 – up from 193,000 the week before. The Labor Department’s much-publicized monthly jobs report is due Friday.

Government bond markets came under renewed pressure during European morning trade, with the yield on the 10-year UK gilt rising 0.03 percentage point to 4.06% as it fell. The gilt market was hit by a crisis last week when the new UK government’s ‘mini’ budget sparked fears about the amount of borrowing needed to fund large tax cuts. Selling intensity eased last Wednesday as the Bank of England intervened to calm the turmoil – but business has been volatile since.

The corresponding 10-year US yield, which is considered the global benchmark for the cost of borrowing, rose 0.03 percentage points to 3.79 percent.

On the currencies side, the dollar was flat after rising more than 1 percent in the previous session, a move that weighed on an already stumbling pound. Sterling rose 0.2 percent to $1.13 on Thursday, staying above levels at which it was trading before British Chancellor Kwasi Kwarteng unveiled his financial plans on September 23. Stocks are back higher as investors assess the prospects for a rate hike

Adam Bradshaw

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