WASHINGTON/LONDON, Oct. 25 (Reuters) – Wall Street continued its march on Tuesday, as weak data raised hopes the Federal Reserve will slow its aggressive pace of rate hikes and European equities saw a second day of gains as better-than-expected economic gains to compensate for concerns.
Sterling rose to a six-week high when Rishi Sunak became Britain’s prime minister, boosting investor sentiment. The US dollar index fell to its lowest point in three weeks, pushing commodity prices up. read more
US Treasuries jumped after dismal home price data.
The Dow Jones Industrial Average (.DJI) rose 1.07%, the S&P 500 (.SPX) gained 1.63% and the Nasdaq Composite (.IXIC) gained 2.25%.
The European STOXX 600 Index (.STOXX) rose 1.4% and ended at a one-month high. MSCI’s main European Index (.MSER) climbed 1.9%, ending at its highest point since mid-September.
Swiss bank UBS (UBSG.S), one of the companies that exceeded market expectations, rose by 7.7%. Europe’s largest bank, HSBC (HSBA.L), fell after a 42% decline in profits in the third quarter.
The MSCI World Stock Index rose 1.65% (.MIWD00000PUS).
US house prices fell more than expected in August, according to the S&P CoreLogic Case-Shiller index. Consumer confidence declined in October after two consecutive monthly increases. read more
“Much of (last week’s rally) is based on a possible slowdown by the Fed. This morning’s housing data is another example that bad news for the economy is good news for the stock market,” said Chris Zaccarelli, chief investment officer. officer of Independent Advisor Alliance in Charlotte, North Carolina.
Asian stocks struggled to turn a profit amid uncertainty over whether President Xi Jinping’s new leadership team would prioritize economic growth in China, where the onshore yuan ended the domestic session with its weakest close since late 2007.
The European Central Bank will meet on Thursday and is expected to raise interest rates by 75 basis points.
The British pound rose 1.67% to $1.14715. On Monday, sterling recovered from session lows and government bond yields fell sharply in a sign of investor relief when former finance minister Sunak was appointed as the new prime minister. But analysts said investor confidence in the ruling Conservative Party’s ability to manage the economy was still shaken.
Eurozone government bond yields fell, while the German 10-year yield was trading as a benchmark at 2.17% .
The yield on 10-year bonds fell to 4.0792%.
German business morale fell slightly in October, but data still beat analysts’ estimates.
The data “suggests that at least business sentiment is bottoming out,” ING global macro head Carsten Brzeski said in a client note. “However, this does not mean that an improvement in the economy is imminent.”
Business activity in the US contracted for the fourth straight month, data from Monday showed that the Fed’s rate hikes have weakened the economy, raising hopes that the central bank will slow down the pace of monetary policy. interest rate hikes could slow down.
Hani Redha, a portfolio manager at Pinebridge Investments, said some investors were relieved by “some hope that the pace of central bank tightening could slow down later this year.”
Economists consulted by Reuters said the central bank should not pause until inflation falls to about half of its current level.
Pinebridge’s Redha said earnings estimates have fallen in recent months but the pace of this has been “fairly modest”.
“The potential relief investors are feeling in terms of approaching the end of the walking cycle seems to dominate over ever-lower earnings estimates.”
The weaker dollar stimulated commodities, making them cheaper for holders of other currencies. US gold futures closed 0.2% higher at $1,658, and spot prices were up 0.29%.
The price of Brent crude rose 26 cents to finish at $93.52 a barrel, while US West Texas Intermediate crude finished 74 cents higher at $85.32. Both benchmarks rose and fell $1 during the session.
Reporting by Elizabeth Howcroft in London and Chris Prentice in Washington; Editing by Matthew Lewis and Jonathan Oatis
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