World markets saw an increase in share prices, while the dollar and bond market interest rates remained stable on Thursday, as the focus turns to U.S. inflation data and the release of the European Central Bank meeting minutes. This data is anticipated to contribute to the ongoing debate on the direction of interest rates.
Despite concerns stemming from the recent escalation of tensions in the Middle East, European stocks reached a three-week high. Asian markets also benefited from a 1.75% increase in Tokyo’s index.
In the United States, Wall Street futures showed a 0.3% increase, and the dollar remained close to a two-week low. This followed the release of Federal Reserve meeting minutes, which indicated growing caution among policymakers regarding the U.S. economy.
Positive news emerged from China as Central Huijin Investment, a state-owned fund, increased its stakes in the country’s four major banks, boosting confidence in the broader Asian market.
However, China also issued a notice prohibiting domestic brokerages and their overseas units from taking on new mainland clients for offshore trading, with the aim of restricting capital outflows.
The recent optimism in the markets is partially attributed to comments from Federal Reserve officials suggesting that U.S. interest rates, which influence global borrowing costs, may have reached their peak. Federal Reserve Governor Christopher Waller expressed that higher market interest rates could help combat inflation, allowing the central bank to take a “watch and see” approach to further rate increases.
Market indicators suggest a reduced likelihood of a November rate hike by the Federal Reserve, with a chance as low as 9%. Furthermore, there is a 70% likelihood that the current interest rate has already reached its peak.
As investors await the crucial U.S. consumer inflation report, economists expect a 0.3% rise in the headline consumer price index (CPI) for September compared to a 0.6% increase in August. The core CPI is predicted to remain steady at 0.3%.
The bond market may not react too bearishly to stronger data due to ongoing geopolitical concerns. An unexpected core rate increase to 0.4% or higher could impact the Fed’s hawkish stance, affecting investors.
Long-term U.S. Treasury yields have eased for the third consecutive session, with some safe-haven demand arising from the Israeli-Palestinian conflict escalation. Oil prices have experienced fluctuations, with Brent futures increasing 1% to $86.65 per barrel, and U.S. West Texas Intermediate crude rising 0.7% to around $84 per barrel. Gold prices have also risen, reaching a two-week high at $1,878.98 per ounce.
Geopolitical risks are a significant factor influencing market movements, with potential concerns regarding the Middle East, Iran, and oil supply disruptions, particularly if Israel were to take action against Iran for supporting Hamas.
