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European stocks increased on Monday as investors weighed calming inflation on both sides of the Atlantic, obtaining alerts from authorities that interest rates would be hiked for a more extended period than the market’s expectations.
The regional Stoxx Europe 600 hiked 0.5%, acquiring its profits for 2023 to 6%, while London’s FTSE 100 rose 0.2%, close to an all-time high on Monday.
Meanwhile, the US markets are shut for the Martin Luther King Jr holiday after Wall Street’s blue-chip S&P 500 recorded its most significant weekly gain in 2 months on Friday.
According to analysts at Morgan Stanley, European stocks have typically benefited from indications of slowing price growth, which estimates roughly 19% surpassing the MSCI Europe index compared to the MSCI US index in terms of a dollar over the past 90 days, marking the most significant return in more than 30 years.
The US bank stated in a note, “This does not necessarily signal the start of a multi-year period of European outperformance.” “However, we think there is a good chance that it marks the end of Europe’s persistent, structural underperformance post the [great financial crisis],” they added.
The moves inculcated as US inflation downshifted to its stubbed level in more than a year in December 2022, while consumer prices in the eurozone surged at an annual rate of 9.2%, down from 10.1% in November 2022.
After that, authorities at the US Federal Reserve and European Central Bank wrangle that core inflation, which denudes volatile food and energy prices, remnants too high to validate cutting interest rates at any time soon.
Due to this, some investors are unsatisfied. Steven Blitz, Chief US Economist at TS Lombard Research Group, stated, “Depending on January and February employment, the 25 basis point hike at this month-end may be the last hike.”
“Look for rate cuts to begin by mid-year,” he added.
However, market rates are now pricing at a 90% chance that the Fed will uplift rates by a 0.25% point when it engages at the beginning of February, down from a 0.5% point increase in December and four 0.75% point moves at the foregoing meetings.
A measure of the dollar’s strength against a basket of 6 currencies surged to 0.1% on Monday, though it has slipped 8.6% in the past three months as the increasing speed of interest rates has slowed.
Further, the euro was traded flat against the dollar at $1.082, having tightened 10.1% over the past 3 months. On the other hand, the yen hit 128.63 against the dollar, which is close to its highest level in more than 7 months, as investors looked ahead to a potentially essential Bank of Japan meeting later this week — the final under long-serving governor Haruhiko Kuroda.
Also in Asia, Hong Kong’s Hang Seng index was traded flat, though it has surged 8% so far currently.
China’s CSI 300 index of Shanghai- and Shenzhen-listed shares hiked 1.5 %, acquiring its January profits to 6.4%.
According to a report from Refinitiv, European natural gas prices in import markets continue to slide on a warmer-than-expected winter. As a result, Dutch TTF gas futures for the upcoming month downshifted 15.1% to €54.85 per kWh hour, at its lowest level since September 2021.
- Published By Team Timeswire