Stocks rally as stagflation fears, energy prices ease

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NEW YORK/LONDON (Businesshala) – World equity markets rose on Thursday after leaders of the US Senate moved to avert US debt defaults, while a global easing in energy prices deepened fears of “inflation” .

Traders work on the floor of the New York Stock Exchange (NYSE) on October 6, 2021 in New York City, US. Businesshala/Brendan McDermid

European markets rallied to 2-1/2-month lows and Wall Street jumped as steady crude oil and natural gas prices offered relief after a 4% drop in German industrial output supply chain Disruptions exposed.

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German production of cars and auto parts fell 17.5% in August due to a lack of supply of intermediate products, providing a clear indication of the constraints posed by a combination of rising inflation and moribund growth, or stagflation.

But the number of Americans filing new claims for jobless benefits fell by the most in three months last week, suggesting that the recovery in the US labor market is gaining momentum after the recent recession eased COVID-19 infections. Had been.

Bill Sterling, global strategist at GW&K Investment Management, said fears of stagflation are over, and investors are more focused on weak economic growth and higher inflation, although the longer-term market trend is higher.

“The journey is ultimately to a global expansion that remains intact, which has faced this stagflation recently,” he said.

The US Senate took a step toward passing a $480 billion increase in the Treasury Department’s lending authorization, a move that would avert a catastrophic loan default later this month but set off another partisan showing in early December. Will do

MSCI’s all-country world index closed up 1.15%, while the broader STOXX Europe 600 index rose 1.6%.

On Wall Street, the Dow Jones Industrial Average gained 0.98%, the S&P 500 gained 0.83% and the Nasdaq Composite was up 1.05%.

Michael James, managing director of equity trading at Wedbush Securities, said some downside pressure has eased as investors reduce positions on concerns about the “what if” scenario related to debt limits.

“There are still a lot of dark clouds in the market, but the skies have cleared a bit over the past two days,” James said.

Euro zone bond yields fell as energy prices tumbled, recovering from a sharp sell-off in debt markets a day earlier that was driven by inflationary concerns.

The yield on the benchmark German 10-year Bund declined 0.3 basis points to -0.187%.

US Treasury yields rose as traders await US employment data for September on Friday. Volatility eased at the shortest end of the curve this month in view of a possible plan to avoid default in government debt.

Investors anticipate that employment figures that are close to consensus will lead the Federal Reserve to signal at its November meeting when it will roll out its massive stimulus program.

The benchmark 10-year US Treasury yield rose 4.7 basis points to 1.5712%.

Oil prices have shaken off early losses to indicate the United States may not release emergency crude reserves or impose restrictions on exports, focusing on tight supplies.

Brent crude was up 1.1% at $81.95 a barrel. US crude rose 1.1% to $78.30 a barrel.

Natural gas prices are still more than five times higher since the start of the year, and the massive increase in recent weeks has caught the attention of policymakers around the world.

US gold futures were down 0.2% at $1,759.20 an ounce.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed up 1.8%, its biggest one-day rise since August.

Hong Kong led Asia’s gains, jumping 3% to a one-year low. South Korea’s Kospi ended with losses of 1.8% and Japan’s Nikkei up 0.5% with losses for eight days.

US-listed Chinese stocks jumped, reflecting a rally in Hong Kong stocks and appeared to ease concerns about US-China trade relations and Evergrande’s debt crisis.

The iShares China Large-Cap ETF and the iShares MSCI China ETF both gained about 4.1%, while e-commerce giant Alibaba gained 8.3%, its biggest one-day gainer since April.

China’s most indebted property companies

The dollar declined from a 12-month high last month against a basket of currencies and remained at a 14-month high against the euro.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.02% to 94.204.

The euro was down 0.03% at $1.1552, while the yen was up 0.17% at $111.6000.

Reporting by Herbert Lash, Additional reporting by Mark Jones in London, Alun John in Hong Kong; Editing by Chizu Nomiyama, Dan Grebler, Chris Reese and Cynthia Osterman

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