Markets consider peak rates, boosting global equities

investmentnews.com:

Global equities surged Thursday and the dollar retreated, as investors wagered the Federal Reserve has reached the end of its 16-month long policy-tightening cycle.

The Stoxx Europe 600 index rose 1%, with almost all sectors gaining, and US futures pointed to a strong session on Wall Street. Contracts on the tech-heavy Nasdaq 100 were up 1.1%. 

The moves come after the Fed raised the federal funds rate to a 22-year high and while it signaled further hikes would be data dependent, many investors reckon it’s done hiking interest rates. They have trimmed bets on more increases this year, as Fed Chair Jerome Powell pointed to signs that higher borrowing costs are working to curb price pressures.

Meanwhile, a predicted 25-basis-point rate rise later Thursday from the European Central Bank could be one of its last moves this cycle.

Pooja Kumra, senior European rates strategist at Toronto Dominion Bank, said Fed hawkishness had been “dialed down a notch.” While upcoming jobs and inflation figures would be crucial for the September meeting, “the current disinflation trend supports a pause rather than a hike,” she added. 

The conviction over peaking US and European rates coincides with a robust earnings season. So far, more than half of all companies have beat analyst estimates and today stands to be the busiest of the second-quarter calendar. 

Among individual movers, BNP Paribas SA, Nestle SA and Carrefour SA all rallied after topping estimates. On the downside, Shell Plc retreated despite pledging more buybacks as its profits fell from last year’s highs. Barclays Plc slumped on back of a 41% decline in quarterly trading revenue.

In New York premarket trading, Facebook parent Meta Platforms Inc. advanced 8% after issuing