Dust settles on stocks surge, OPEC+ talks supply cuts

LONDON, Oct 5 (Reuters) – World stocks clung to two-week highs on Wednesday, although another aggressive rate increase from New Zealand tempered the idea that central banks may be close to slowing down the pace of rapid monetary tightening.

Oil prices were little changed before a meeting of OPEC+ producers to discuss a big cut in crude output after gaining more than 3% in the previous session.

Asian shares rallied, but European equity markets opened broadly lower and U.S. equity futures pointed to a weak start for Wall Street.

Register now for FREE unlimited access to Reuters.com

The S&P 500 index (.SPX) posted its biggest single-day rally in two years on Tuesday after softer U.S. economic data and a smaller-than-expected interest rate hike from Australia stirred hope for less aggressive tightening by the Federal Reserve.

Yields on 10-year U.S. Treasuries, which move inversely to prices, meanwhile are down 12 basis points just this week, as hopes for a slowdown in rapid Fed tightening took hold.

But a more cautious tone surfaced on Wednesday, with a sharp rate rise in New Zealand dampening hopes for a pause or slowdown in aggressive hikes from other major central banks.

Maximilian Kunkel, chief investment officer for Germany and global family and institutional wealth at UBS, said talk of rate hikes slowing down was premature.

“To us, especially when we think about central bank actions, it is too early to call for the Fed to pause imminently,” he said. “We need indications of a clear downtrend in U.S. inflation… and further signs of a cooling of the labor market. And we’re not there yet.”

European shares fell, after rallying more than 5% in the previous three sessions. Europe’s broad STOXX 600 index (.STOXX) was down 1%, while blue-chip indices in London, Paris and Frankfurt were down as much as 0.5%.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 2.3%, after U.S. stocks ended the previous session with gains.

That left MSCI’s World Stock Index up around 0.2%, having touched its highest level in around two weeks earlier in the session. (.MIWD00000PUS)

WAITING FOR OPEC+

Investors closely awaited a crucial supply decision from OPEC+ due later Wednesday, which could have global implications for already high energy prices and inflation.

After making strong gains the previous day, U.S. crude was flat at $86.60 a barrel and Brent crude was just 0.1% firmer at $91.86 per barrel.

OPEC+, which includes Russia and Saudi Arabia, could cut between 1 and 2 million barrels a day, according to a Reuters report.

U.S. Treasury yields headed back higher and the dollar steadied, having suffered its heaviest setback in more than two years on Tuesday. The yield on benchmark 10-year Treasuries , were around 7 basis points higher at 3.69%.

The dollar was 0.2% firmer at 144.40 yen , while the euro was around 0.4% softer at $0.9945 , having gained 1.7% on Tuesday in its biggest one-day percentage gain since March.

“Despite European assets rebounding quite sharply, it’s hard to point to any material change in the eurozone’s outlook that would warrant a significant return of market appetite for the euro just yet,” said ING currency strategist Francesco Pesole.

Elsewhere, spot gold traded at around $1,713 per ounce, down about 0.75%.

Register now for FREE unlimited access to Reuters.com

Reporting by Dhara Ranasinghe and Elizabeth Howcroft; Editing by Toby Chopra

Our Standards: The Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money driving “Web3”.