Economy
World stocks gauge pauses after big run, heavy central bank week
A gauge of global stock markets took a breather on Friday after a run to 14-month highs, while the U.S. dollar headed for its biggest weekly slide since January following a heavy week of central bank meetings around the world.
The MSCI All-World index edged down 0.06% but remained near its highest level since mid-April 2022. Wall Street’s main equity indexes ended lower but tallied solid weekly gains.
Ending an intense week of central bank actions, the Bank of Japan maintained its ultra-easy monetary policy on Friday despite stronger-than-expected inflation. Earlier in the week the Federal Reserve kept rates unchanged, while suggesting more hikes could come later in the year, and the European Central Bank hiked by a quarter-point.
“We have had a pretty constructive week,” said Art Hogan, chief market strategist at B Riley Wealth.
“The ECB and the UK likely are still in the process of being in the throes of tightening, where the U.S. is certainly knocking on the door of being through with the rate hiking cycle and I think that has been driving some divergences.”
On Wall Street, the Dow Jones Industrial Average fell 108.94 points, or 0.32%, to 34,299.12, the S&P 500 lost 16.24 points, or 0.37%, to 4,409.6 and the Nasdaq Composite dropped 93.25 points, or 0.68%, to 13,689.57.
The pan-European STOXX 600 index rose 0.5%, while Japan’s Nikkei rose 0.7% for a 10th straight week of gains.
In currency markets, the dollar index, which measures the greenback against a basket of currencies, rose 0.18%, with the euro down 0.09% to $1.09.
Still, the dollar was set to log its biggest weekly percentage drop since mid-January.
Meanwhile, the yen fell to its lowest point against the euro in 15 years after the BOJ’s decision. The Japanese currency also weakened 1.07% versus the greenback at 141.84 per dollar, dropping to a six-month trough.
“The yen is suffering from a big negative yield gap versus other G10 currencies,” said Vassili Serebriakov, FX strategist at UBS in New York.
U.S. Treasury yields rose, with the benchmark 10-year yield rising after two straight days of declines as comments from Fed officials indicated the central bank was not yet done with its interest rate hikes.
Fed Governor Christopher Waller said at an economics conference that core inflation “is not coming down like I thought it would,” which probably would require more tightening.
Benchmark 10-year notes were up 4 basis points to 3.77% from 3.73% late on Thursday.
Oil prices rose and posted a weekly gain, as higher Chinese demand and OPEC+ supply cuts lifted prices.
U.S. crude settled up 1.6% at $71.78 per barrel and Brent settled at $76.61, up 1.2% on the day.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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