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Fears of delayed rate cuts pressure markets, Chinese stocks jump

Stocks around the world fell early in the week as Federal Reserve (Fed) Chairman Jerome Powell’s interview over the weekend poured cold water on traders’ hopes for rapid interest rate cuts. A notable exception was China, where authorities revealed another set of measures aimed at supporting stock markets.

Shane Strowmatt, LGT
Reading time
5 minutes
Falling market
© Shutterstock

After last week’s record highs for all major US indices, the rally on US stock markets was stopped in its tracks by worries that the Fed won’t cut as early or quickly as many market participants had previously hoped. The Dow Jones Industrial fell 0.7% and the S&P 500 lost 0.3%. The Nasdaq-100 was down 0.2% to finish Monday’s session. Treasuries followed the same narrative as stocks, trading weaker on Powell’s interview comments. Treasury yields were up to start the week with yields on two-year US government debt trading around 4.47% while 10-year yields were at 4.18%.

In individual stocks, shares of UniCredit jumped more than 8%, reaching their highest level in nearly a decade on Monday. The Italian bank said they will return EUR 8.6 billion to shareholders in the form of dividends and share buybacks after reporting fourth-quarter profit well beyond market expectations. The Euro Stoxx 50 index finished Monday roughly flat.

In the Asia-Pacific region, stock markets were trading mostly lower, except in China, where regulators revealed more measures to prop up stock markets. Authorities in the world’s second-largest economy announced a series of measures intended to mitigate short-selling. The measures come as Chinese stocks have plunged to multi-year lows in recent weeks due to a weak economic recovery last year following strict Covid measures and concerns about the state of the country’s real estate market. The effect of the new measures was immediately felt, with Hong Kong’s Hang Seng Index shooting up 3.6%, while the Shanghai Composite jumped 2.6%.

Elsewhere, Australia’s S&P/ASX 200 was down 0.6%, in line with most other markets out of the region, after the country’s central bank kept rates steady at the highest level in 12 years and warned market participants that further hikes may be necessary to get inflation under control. The Australian dollar strengthened versus other major currencies following the announcement.

In Tokyo, the Nikkei 225 finished Tuesday’s session down 0.6% despite support from Toyota, which gained 4.8%. The world’s best-selling carmaker posted third-quarter results that beat analyst expectations and increased its operating profit forecast for the full year. In South Korea, the Kospi also finished Tuesday’s session 0.6% lower.

Corporate news in focus: Quarterly figures from Amgen, BP, Ford, Infineon, Linde, Toyota, UBS.

Economic data in focus: Euro area retail sales, Governor of the Bank of Canada Tiff Macklem speaks.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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