European equities rise, dollar falls as market sell-off pauses

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© Reuters. FILE PHOTO: A man wearing a protective mask amid the COVID-19 outbreak is reflected on an electronic board showing stock quotes outside a brokerage in Tokyo, Japan, Sept. 21, 2021. REUTERS/Kim Kyung-Hoon

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By Elizabeth Howcroft

LONDON (Reuters) – European equities opened higher on Tuesday, rebounding slightly from last week’s 17-month lows as the sell-off ended, but major central bank rate hike plans and global recession risks kept investors cautious.

Global equities have risen so far this week, recovering from last week’s sharp sell-off, which saw global equities plunge to their lowest point since November 2020, as expectations for a tightening of central bank policies to combat high inflation have risen. investors to dump risky assets.

Monday at 0750 GMT, the MSCI world stock index, which tracks stocks in 50 countries, was up 0.5% on the day.

Europe’s rose by 1% and London’s by 0.6%.

Still, analysts expect the recovery to be short-lived. Timothy Graf, Head of Macro Strategy for EMEA at State Street (NYSE:) Global Markets, said the increase was likely the result of markets being oversold in recent weeks and the relief that risks from events such as the Bank of Japan and Swiss National Bank meetings, be over.

“I think it’s a pause in what’s still a trend where you have an increasing chance of slowing growth, high inflation — possibly stagflation,” he said.

“I don’t think stock markets and the earnings outlook for companies have really taken that into account.”

Earlier in the session, Reserve Bank of Australia governor Philip Lowe signaled more rate hikes and said inflation was expected to hit 7% by the end of the year.

The German trade association BDI lowered its economic forecast for 2022 and said a halt in Russian gas supplies would make a recession in Germany inevitable.

European bond yields rose with German 10-year yields rising 8 basis points to 1.736%.

In the foreign exchange markets, the euro rose 0.5% to $1.0561, falling 0.4% to 104.07 on the day.

The US 10-year yield stood at 3.2882%, down from last week’s peak of 3.495% — the highest since 2011 — which came on the same day the Fed hiked rates by a whopping 75 basis points.

The Japanese yen, which has fallen sharply in recent months, has held steady around USD 135.19.

The Japanese Prime Minister said the central bank must maintain its current ultra-easy monetary policy. This makes it an outlier among other major central banks.

Oil prices rose as investors focused on tight supplies of crude oil and fuel products. futures were up 1.1% to $115.38, while US West Texas Intermediate (WTI) crude futures were up 1.9% to $111.63.

Gold had changed little at about $1,838 an ounce.

was around $21,000, after stabilizing slightly since falling to $17,592.78 over the weekend. Cryptocurrencies have increasingly become a measure of risk appetite, State Street’s Graf said.

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