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WASHINGTON, Feb 2 (Reuters) – Global stocks rallied on Wednesday to close higher as strong U.S. tech company earnings and OPEC+ plans for subdued oil production helped counter jitters over weak economic reports.
Investors also ignored the pace of central bank interest rate hikes.
The STOXX Index (.STOXX) of 600 European companies rose 0.45%, up for a third consecutive session, to recoup nearly half of its losses during January’s global rout.
The MSCI Global Stock Gauge (.MIWD00000PUS) gained 0.80%.
Crude oil hit seven-year highs and the dollar eased. On Wall Street, the Dow Jones Industrial Average (.DJI) rose 0.63% and the S&P 500 (.SPX) gained 0.94%.
The Nasdaq Composite (.IXIC) added 0.5%. Last month, the tech-focused index fell 19% from its all-time high in November as investors dumped popular growth stocks on the prospect of faster-than-expected rate hikes.
“The temptation to step in and buy into the sell-off of high-growth stocks should be avoided,” said Andrew Slimmon, managing director of Morgan Stanley Investment Management.
“Once the fever drops, it’s done for a good while.”
An unexpected decline in private payrolls helped stabilize US Treasury yields as investors weighed its potential impact on Friday’s broader jobs report. Read more
Record eurozone inflation of 5.1% in January defied expectations for a decline to 4.4%, sending German government bond yields to multi-year highs and the euro higher. Read more
The European Central Bank has insisted that the price growth is temporary and benign, but markets will look for any change in tone when it meets on Thursday.
“The surprisingly high inflation rate is a slap in the face for the ECB. It will finally have to recognize the massively increased inflation risks and take its foot off the monetary policy pedal,” said Joerg Kramer, chief economist at Commerzbank. .
Several Asian markets, including China, were closed for the Lunar New Year holiday.
Investor sentiment swung between concerns about tightening by the Federal Reserve and other central banks and confidence in the economic recovery. Wednesday’s earnings outlook helps ease uncertainty, but stubborn inflation and geopolitical risks remain a threat.
“The tug of war between rising interest rates and corporate earnings continues,” said Jake Manoukian, who heads US investment strategy at JP Morgan Private Bank.
Markets are pricing in a series of rate hikes from the Fed and the Bank of England, analysts said.
The BoE meets on Thursday and markets expect the central bank to raise UK rates. Read more
Fed officials sought to downplay the possibility of a half-point rate hike in March. Although he said he saw three successive hikes starting in March, St. Louis Fed President James Bullard pushed back on the idea of an initial move by half a percentage point. Read more
Friday’s U.S. nonfarm payrolls numbers will also be closely watched.
OPEC+ OIL EYES
Oil prices jumped on Wednesday, nearing a seven-year high, after OPEC+ maintained its planned output increase despite pressure from major consumers to increase production more quickly.
An OPEC+ source told Reuters the producer group had agreed to increase oil production by 400,000 bpd from March after a short meeting.
US crude recently fell 0.22% to $88.01 a barrel and Brent was at $89.34, up 0.2% on the day.
The year-to-date bond market sell-off came to a halt on Tuesday, with benchmark 10-year U.S. Treasury yields near their lowest levels in a week.
Benchmark 10-year US Treasury yields fell one basis point to 1.768%.
Treasury yields, which move inversely to prices, rose in January by some measures since 2009, the fastest as investors began pricing in the possibility that the Fed could raise interest rates to as high as five times this year.
Spot gold gained 0.3% to $1,806.81 an ounce despite a downbeat jobs report, supporting demand for the safe-haven metal amid simmering tensions between Russia and the West over from Ukraine.
Risk-sensitive currencies such as the Australian dollar, euro and British pound appreciated. The dollar index fell 0.29%, with the euro up 0.31% at $1.1304.
The ruble strengthened to a near two-week high post 76 against the dollar after the Kremlin said Russia had plans in place to hedge against possible US sanctions if Russia invades Ukraine neighbor. Read more
Additional reporting by Huw Jones in London, editing by Alison Williams, Richard Chang and Alistair Bell
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