Euro jumps on ECB peg, global equities hit 1-week high

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  • Euro gains 1% on ECB, dollar index down 0.95%
  • US Stock Futures Rising; Powell vows to fight inflation
  • Chinese blue chips rise 1.4%, Hong Kong gains 2.8%

LONDON/SYDNEY, Sept 9 (Reuters) – The euro climbed back above parity to a two-week high against the dollar on Friday after a sharp rate hike and hawkish comments from the European Central Bank, while a weaker dollar helped global equities climb to a one-week high.

The euro posted gains of 1.5% for the week after the ECB raised rates by a record 75 basis points on Thursday and announced further hikes to fight inflation, even as the economy of the bloc is likely heading into a winter recession.

Meanwhile, Federal Reserve Chairman Jerome Powell said on Thursday the bank was “strongly committed” to controlling inflation, but hoped to be able to do so without the “very high social costs” involved in anti-corruption struggles. past inflation.

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“We’ve seen more hawkish comments from central banks, not just in the US but around the world – the Bank of England and the ECB,” said Matthias Scheiber, global head of portfolio management for Central Banks. multi-asset solutions at Allspring.

“You can see it in short-term interest rates.”

The euro jumped 1% to $1.0102 as the yield on German two-year bonds jumped 9 basis points to 1.417%, hitting its highest level since 2011 for a second day.

“A further 75 basis point rate step is entirely possible for the October (ECB) meeting, as inflation is likely to rise further for now,” Commerzbank analysts said in a note.

The dollar fell 0.95% against a basket of major currencies.

The MSCI World Stock Index (.MIWD00000PUS) rose 0.63%, heading for a weekly gain of 1.5%.

U.S. S&P 500 futures rose 0.5% and Nasdaq futures rose 0.8%, after major Wall Street indices posted modest gains overnight, after strong sales earlier in the week.

European stocks (.STOXX) rose 0.73%, helped by bank stocks on eurozone rate hike expectations, while Britain’s FTSE 100 (.FTSE) gained 1%, both indices reaching nine-day highs.

The pound rose 1.1% against the dollar after Britain’s new leader, Liz Truss, announced a cap on soaring consumer energy bills for two years on Thursday to cushion the economic blow of war in Ukraine. .

Analysts said the death on Thursday of Queen Elizabeth, Britain’s longest-reigning monarch, would have little impact on the economy. Read more

The dollar fell 1.2% against the yen to 142.32, pulling back from recent 24-year highs.

The Japanese currency fell victim to the Bank of Japan’s accommodative monetary stance, unlike rate hikes elsewhere.

The yield on the benchmark 10-year US Treasuries rose 2.3 basis points to 3.3154%.

US rate futures have priced an 86% chance that the Fed will hike another 75 basis points at this month’s meeting, which would lift the fed funds rate to a range of 3.0. % to 3.25%. That’s up from a 77% chance a day ago.

“There’s still a lot of tightening to come, but I guess the Fed is getting closer to the top, so we’ll probably see some slowing in the pace of the increases, if not at this month’s meeting, maybe at the subsequent meetings,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) jumped 1.5%, led by a 2.8% rise in Hong Kong’s Hang Seng index (.HSI) and a 1.4% rise in Chinese bluechips (.CSI300).

Consumer and producer prices in China rose less than expected in August, data showed on Friday, stoking hopes of renewed stimulus from Beijing as the economy falters. Read more

The Japanese Nikkei (.N225) gained 0.5%.

Oil prices rose on Friday as investors considered Russia’s threat to halt oil and gas exports to some buyers. U.S. crude rose 1.2% to $84.53 a barrel while Brent crude jumped 1.4% to $90.41 a barrel.

Spot gold rose 1.22% to $1,726 an ounce, helped by dollar weakness.

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Editing by Kenneth Maxwell and William Mallard

Our standards: The Thomson Reuters Trust Principles.

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