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Wall Street headed higher as tech investors lick their wounds

Wall Street headed higher as tech investors lick their wounds
Written by Publishing Team

  • Rise in US stock futures pushed Europe into the dark
  • Crude oil prices retreat from their highest levels in 2014
  • US Treasury yields rise
  • Chinese stocks gain after cutting record mortgage rates
  • The risk of a conflagration in Russia and Ukraine could weigh on the markets

LONDON (Reuters) – Wall Street headed higher on Thursday, sending European shares back into the dark as investors in major tech companies licked their wounds after the Nasdaq slipped into correction territory.

However, concerns that the US Federal Reserve will be bolder in raising interest rates this year compared to the market continued to dampen investor confidence.

Crude oil prices retreated from their 2014 highs, and the dollar fell as the week’s rise in US Treasury yields paused.

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Nasdaq futures rose 0.7%, indicating that Wednesday’s sell-off in technology stocks due to higher yields and Fed tightening will pause for now.

The tech-laden Nasdaq is down more than 10% from a record closing high on November 19. S&P 500 and Dow futures were also firmer.

US data due on Thursday includes the Philadelphia Fed Survey for January and US Initial Jobless Claims.

In Europe, the STOXX (.STOXX) index of 600 European companies rose 0.2% at 481 points, below its lifetime high of 495.46 points in the first week of trading this year.

The MSCI All Share Index of Qatar (.MIWD00000PUS) was in positive territory gaining 0.2% at 729 points, but still down about 3.8% so far this year.

“There is a great deal of caution now,” said Sima Shah, chief strategist at Principal Global Investors. “The main factor that markets are considering is Fed tightening.”

Higher US interest rates, which would raise borrowing costs, could dampen global growth prospects and international corporate earnings expectations.

A Reuters poll of economists showed that they expect the Federal Reserve to tighten monetary policy at a much faster pace than thought a month ago to tame high inflation. Read more

Shah said that opening the year with higher valuations in the markets and bond selling since then has fueled a growing sense of caution as market participants question whether they have priced enough Fed rate increases.

“That’s what’s driving a lot of caution right now. Even with four hikes, the question is, is that enough and should we get ahead of this persistent prediction we’ve been seeing,” Shah said.

European Central Bank President Christine Lagarde said that inflation in the euro area will gradually decrease throughout the year, adding that the European Central Bank does not need to act as boldly as the Federal Reserve due to the different economic situation. Read more

US technology and bonds

Asia overwhelms, the eye of Ukraine

Asian stock markets broke their five-day slide, driving higher on Thursday as China underlined its mixed monetary and economic picture by slashing record mortgage rates. Read more

China’s premier CSI300 Index (.CSI300) rose 0.9% on the day, led by property developers, on hopes that government measures will ease funding pressure in the embattled sector, even as another developer warned of a default. Read more

Analysts at ING said geopolitical risks, in particular the possibility of Russia’s invasion of Ukraine, may continue to weigh on global stocks, adding to pressure from expectations of higher interest rates.

US President Joe Biden on Wednesday predicted Russia would make a move on Ukraine, saying a large-scale invasion would be a “disaster for Russia” but noting there could be a lower cost to a “small incursion”. Read more

Fed rate hike concerns pushed US Treasury yields to two-year highs on Wednesday, and took German 10-year bond yields into positive territory for the first time since May 2019.

US yields rose on Thursday but remained below the highs of the previous session.

The benchmark US 10-year yield was little changed at 1.836% from Wednesday’s US close of 1.827%, and the policy-sensitive two-year yield touched 1.0413% compared to the US close at 1.025%.

A pause in the Treasury yields’ rally to the top kept the US currency in check, as the dollar index, which measures the greenback against six major peers, was unchanged at 95.617 as commodity currencies benefited from higher oil prices.

The US dollar was little changed against the Japanese yen at 114.28, and it settled against the euro at $1.1337.

In the commodity markets, oil prices retreated from highs after touching their highest levels since 2014 on Wednesday due to strong demand and short-term supply disruptions.

Global benchmark Brent crude last fell 0.4% to $88.06 a barrel, and US crude fell 0.4% to $86.61 a barrel.

Gold paused after its best session in three months the day before. Spot gold was little changed at $1,838 an ounce.

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Additional reporting by Andrew Galbraith. Editing by Bernadette Bohm

Our Standards: Thomson Reuters Trust Principles.

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