Economic news

World Shares Climb Higher on Central Bank Announcements

  • Dollar falls, euro, sterling rise on central bank announcements
  • Sterling, UK bank shares leap as BOE hikes rates
  • Traders eye conclusions of ECB meeting

NEW YORK, Dec 16 (Reuters) - World stocks moved higher on Thursday after Britain and Norway hiked interest rates and the ECB trimmed its super-sized bond buying program one day after the U.S. Federal Reserve sped up the pace of tapering.

In the United States, recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety, but with most of the biggest market-moving events for the year now over, Wall Street was mostly higher.

Sterling and UK bank shares both shot up after the BOE hiked rates by 0.1%, while Turkey's lira took another bashing after its own central bank ploughed on with rate cuts. 

Omicron numbers are skyrocketing, with Europe facing a fourth wave of infections, but for once this was not affecting the markets.

The pan-European STOXX 600 index rose 1.34% and MSCI's gauge of stocks across the globe gained 0.43%.

By 11:30 a.m. EST (1630 GMT), the benchmark S&P 500 gave up some of its earlier gains, but still inched closer to a record high.

The Dow Jones Industrial Average rose 160.59 points, or 0.45%, to 36,088.02, the S&P 500 lost 3.16 points, or 0.07%, to 4,706.69 and the Nasdaq Composite dropped 187.95 points, or 1.21%, to 15,377.64.

The dollar index fell 0.28%, while sterling rose 0.40% to $1.3316 and the euro rose 0.19% to $1.1307. 

U.S. 10-year yields were at 1.4224% , while 30-year yields were at 1.8613 .

The Fed had laid out a scenario in which the pandemic, despite the Omicron surge, gives way to a benign set of economic conditions, with inflation easing largely on its own, interest rates increasing slowly, and unemployment staying low.

"If the Fed moves (hikes interest rates next year), it will be OK as long as there is growth," said Barrow Hanley's Head of International Equities Rand Wrighton, referring to bets U.S. rates could go up three times before the end of 2022.

Data out Thursday showed the number of Americans filing new claims for unemployment benefits increased moderately last week, though remained at levels consistent with tightening labor market conditions. 

Separately, a survey showed production at U.S. factories increased to its highest level in nearly three years in November. 

The ECB in Frankfurt said it would cut its bond purchases under its 1.85 trillion euro Pandemic Emergency Purchase Programme (PEPP) next quarter and wind down the scheme by March in a long-flagged move.

It will, however, keeping reinvesting PEPP profits until the end of 2024 and ramp up the longer-running but more rigid Asset Purchase Programme (APP) to limit the withdrawal effects.

"On balance, the new approach to quantitative easing (QE) is slightly dovish," Gurpreet Gill, macro strategist, global fixed income, at Goldman Sachs Asset Management, said.

Norway's central bank, which had hiked in September on the back of an economic rebound, went ahead with a further rise as expected and said more were likely to follow. The Swiss National Bank kept its rates locked at -0.75%. 

Oil nudged above $75 a barrel, supported by record U.S. implied demand and falling crude stockpiles, even as the spread of the Omicron coronavirus variant threatens to put a brake on consumption globally.

U.S. crude recently rose 2.41% to $72.58 per barrel and Brent was at $75.18, up 1.76% on the day.

Reporting by Elizabeth Dilts Marshall in New York and Marc Jones in London; Editing by Lisa Shumaker

Source: Reuters

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