©Reuters. FILE PHOTO: A passerby walks past an electric monitor showing the stock price index of various countries outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo
By Herbert Lash and Marc Jones
NEW YORK/LONDON (Reuters) – Global stock markets rebounded on Thursday on expectations that the Federal Reserve and other central banks will soon cut interest rates, although not as soon as hoped, while bond yields Treasuries fell again on concerns over US regional banks.
Fed Chair Jerome Powell on Wednesday dismissed market speculation that rates would be cut in March, triggering a sell-off on Wall Street that lingered into Thursday as investors turned their attention to corporate earnings.
MSCI’s index of stock performance across 47 countries was mixed at first, but then rose as investors looked ahead to results from megacap stars Apple (NASDAQ:), Amazon.com (NASDAQ:) and Meta Platforms ( NASDAQ:) after the bell.
A number of investors had already discounted the narrative that many rate cuts were on the horizon, said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“For most investors the important thing is the trend that rates are likely to fall, although not as quickly as some would like,” Meckler said, adding that the focus now is on earnings and whether megacap results can support their prices.
Apple’s iPhone sales are expected to show the best growth in five quarters, but analysts see a tough year for the company in China. Merchants are eager to see whether Amazon can profit from the delivery burden by increasing commission revenue from its “Buy with Prime” service.
The MSCI All Country global index closed up 0.67%. On Wall Street the increase of 0.97%, the increase of 1.25% and the advance of 1.3%.
Futures reduced bets for a rate cut in March to 37.5% from nearly 90% at year-end 2023, but raised the probability of one or two cuts to 96% when the Fed meets in May, according to CME Group (NASDAQ:) FedWatch Tool.
The Fed’s fight against inflation got a boost Thursday, with data showing U.S. worker productivity grew faster than expected in the fourth quarter to keep unit labor costs subdued.
Labor Department data also shows that labor market momentum is slowly fading, which could help curb wage inflation. Other data showed that first-time applications for unemployment benefits reached their highest level in two months last week.
The dollar fell against the euro and yen, while sterling rebounded after a Bank of England meeting that sought further evidence of slowing inflation before cutting rates.
The , which measures the U.S. currency against six others, fell 0.52%. The euro rose 0.48% to $1.0868, the yen strengthened 0.32% to 146.42 per dollar and the pound settled at $1.2744, up 0.47 % during the day.
Euro zone inflation fell as expected last month, but underlying price pressures fell less than expected, likely strengthening the European Central Bank’s case that rate cuts should not be rushed.
The pan-European index lost 0.37%.
Treasuries rallied sharply, with 10-year yields falling 10 basis points to 3.865%, amid jitters at U.S. regional banks after actions by Community Bancorp of New York (NYSE:) fell further on commercial real estate concerns.
The KBW regional banking index fell 2.28%.
“If we didn’t have the problem with New York Bancorp, where concerns about tight credit conditions have clearly impacted that bank’s profitability, then we would probably be talking about a different story when it comes to rates,” said Paresh Upadhyaya, director of currency establishes Amundi US strategy in Boston.
Asian markets were choppy overnight. MSCI’s broader index of Asia-Pacific shares rose 0.2%, helped by Chinese blue chips which posted a four-day decline, along with better surveys of home prices and manufacturing.
fell 0.8% while the yen gained.
Oil prices fell more than 2% after false market speculation that Israel would agree to a ceasefire in Gaza. A Qatari official told Reuters that Hamas welcomed the ceasefire proposal but had not yet responded.
futures fell $1.85 to settle at $78.70 a barrel, while U.S. West Texas Intermediate crude futures fell $2.03 to settle at $73.82.
Gold settled near a one-month high after data showed weekly U.S. jobless claims rose last week.
The United States rose 0.2% to $2,071.10 an ounce.