A global stock gauge posted its biggest one-day percentage gain in nearly a month on Tuesday and the dollar weakened for a third straight day as expectations grew for the European Central Bank to adopt a hike in rate higher than expected this week.
A Reuters report that the ECB was expecting a 50 basis point rate hike at its Thursday meeting, double the hike many market participants had expected, helped put the euro on the right track. lane for its biggest one-day percentage gain in nearly two months.
Easing expectations that the US Federal Reserve would resort to a 100 basis point hike at its meeting next week put the dollar on course for its third consecutive session of declines after hitting a high of two decades last week.
The dollar index fell 0.66%, with the euro up 0.81% at $1.02.
“We are now seeing a subtle but significant change in the outlook for transatlantic monetary policy, and that is proving to be good for the euro,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Stocks on Wall Street have largely rallied, joining their European counterparts, with each of the 11 major S&P sectors climbing as the U.S. corporate earnings season heats up.
But Johnson & Johnson shares fell 1.46% after reporting better-than-expected results but cut its full-year outlook, citing a stronger dollar.
“You’ve seen expectations for a 100 basis point hike from the Fed next week back to 75 basis points. The dollar has weakened a bit as the ECB is talking about possibly raising rates by 50 basis points basis instead of 25 basis points,” said Anthony Saglimbene, global market strategist at Ameriprise Financial in Troy, Michigan.
“It’s no surprise that with the dollar falling, the stock market is performing a bit better. If the odds of a recession drop in the next two months, I would expect the dollar to fall and that would be a tailwind for multinational profits.”
The Dow Jones Industrial Average rose 754.44 points, or 2.43%, to 31,827.05, the S&P 500 gained 105.72 points, or 2.76%, to 3,936.57 and the Nasdaq Composite added 353.10 points, or 3.11%, to 11,713.15.
The Nasdaq posted its biggest one-day percentage gain since June 24, while the S&P 500 closed at its highest level since June 9. Of the 48 S&P 500 companies that reported earnings through Tuesday morning, 89.2% beat expectations, according to Refinitiv data. , compared to an 81% beat rate over the past four quarters.
U.S. economic data showed the effect of the Fed’s hike policy, as U.S. new home building activity fell to a nine-month low in June and permits for new construction projects fell in an environment of rising mortgage rates.
The pan-European STOXX 600 index rose 1.38% and the MSCI gauge of stocks across the world gained 2.05%. The MSCI index posted its biggest one-day percentage gain since June 24.
The STOXX 600 closed at its highest level since June 9, after a report that Russian gas flows to Europe via the Nord Stream 1 pipeline would restart in time eased concerns about an oil crisis. regional energy supply.
Benchmark 10-year notes last fell 17/32 to 3.02%, down from 2.96% on Monday night.
Along with the ECB, the Bank of Japan is also expected to meet on Thursday, although the extremely dovish central bank is expected to maintain its stance.
Crude prices erased early losses to rise in volatile trading, a day after stabilizing around 5% higher as the market gauged the possibility of a recession that could weigh on demand amid rising tight supplies.
U.S. crude was 1.58% higher at 104.22 a barrel and Brent was up 1.02% on the day at $107.35.
(Edited by : Sangam Sing)