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Global stocks move away from record highs, central banks in focus


Global stocks have retreated from record highs as investors look to central banks for the direction of tightening monetary policy. This is a stark reminder of the supply chain issues in corporate earnings reports.

On Wall Street, the S&P 500 lost 0.51% from an all-time high reached Tuesday, the Nasdaq finished flat, propelled by strong earnings from Microsoft and Google’s parent company Alphabet.

Revenue reports released by the companies show that the largest US manufacturers, including General Motors, General Electric, 3M and Boeing, are facing logistics challenges and higher costs due to global bottlenecks expected to persist next year, according to a Reuters report. GM fell 5.4% after the release of its results on Wednesday.

In Asian markets, the loss-leading Japanese Nikkei fell 1.1%, MSCI’s global equity gauge ACWI fell 0.05% on Thursday morning.

Mainland Chinese stocks were down 0.2%, while the MSCI’s largest Asia-Pacific stock index outside Japan fell 0.1%.

Japanese IT conglomerate Fujitsu lost 9.8%, while robot maker Fanuc fell 8.5% as its revenue showed a larger-than-expected chip shortage impact.

Investors are watching closely whether the world’s central banks will seek to reduce their generous pandemic stimulus more quickly, even as the global supply disruption fuels concerns about inflation.

The signal came from the Bank of Canada, which ended its quantitative easing earlier than expected and signaled that it could raise interest rates sooner than expected, as early as April 2022.

Following the BoC’s decision, investors are wondering if the US Federal Reserve, too, could move faster towards rate hikes.

The Fed is expected to announce the reduction in its bond purchases at its policy meeting next week. The yield on two-year US Treasuries reached 0.528 percent and was last at 0.501 percent. At the beginning of October, it was close to 0.26%.

However, longer-term yields have fallen in part, as tighter monetary policy is likely to keep inflation under control over time. US 10-year bond yields fell to 1.545 percent, after a five-month high of 1.705 percent reached a week ago.

UK gilt yields plunged after the UK government cut its borrowing forecast more than expected, helping to push global bond yields lower.

The 10-year Gilt yield fell 12.8 basis points on Wednesday to 0.982%, its biggest drop since March 2020.

The Canadian dollar held steady at C $ 1.2362 to the dollar in foreign exchange markets following the BoC’s surprise.

Other major currencies were on hold ahead of the Bank of Japan and European Central Bank’s policy announcements later today. According to the Reuters report, no major changes are expected.

The yen rose to 113.73 per dollar, following its four-year low of 114.695 reached last week. The euro changed hands to $ 1.1600.

Oil prices fell after US crude oil inventories rose more than expected. Brent fell 1.8% to $ 83.07 per barrel, from Monday’s seven-year high of $ 86.70, while U.S. crude hit $ 81.25 per barrel, down 1.0. 7% and from Monday’s high of $ 85.41, a seven-year high.

With contributions from the agency

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