Stocks hit two-year highs, dollar eases

Global shares traded at their highest in over two years on Wednesday, supported by relatively robust earnings and a retreat in the dollar, although trouble among U.S. regional banks and scepticism over China’s efforts to support its markets made for cautious trading.

Bonds came under modest pressure, following comments from Federal Reserve officials that did little to shift expectations for the outlook for monetary policy.

The MSCI All-World index rose 0.1% to reach its highest since mid-January 2022, led in part by a rally in Chinese blue-chips, which have gained almost 5% in the last two trading days.

In recent days, China’s regulators have announced further curbs on short selling and state investors said they were expanding their stock buying plans.

Bloomberg News also reported President Xi Jinping would discuss the stock market with financial regulators, though there was no confirmation this had happened or what was discussed.

On Wednesday, the head of China’s securities regulator had been replaced, the official Xinhua news agency said, as policymakers struggle to stabilise the country’s main stock indexes after a plunge to five-year lows.

“We’re looking at more than $5 trillion being wiped out from the equity markets. Clearly, they want to stem those losses, they want to introduce and change and they’re trying to be a lot more forceful about it,” Aneeka Gupta, equity strategist at wisdomtree, said.

In Europe, stocks fell in an earnings-heavy day, while S&P 500 futures and Nasdaq futures were down 0.1%. Companies reporting earnings on Wednesday include Uber (UBER.N), opens new tab, Walt Disney and PayPal.

The banking sector remained a concern as Moody’s downgraded New York Community Bancorp (NYCB.N), opens new tab to junk citing pressure on its funding and liquidity. The stock lost 22% on Tuesday, to be down 60% since it reported surprise losses last week.

MORE FED SPEAKERS

The timing of U.S. rate cuts was no clearer after Federal Reserve regional presidents Loretta Mester and Neel Kashkari welcomed the progress on inflation but signalled there was more work to do before policy could be eased.

Fed Governors Adriana Kugler and Michelle Bowman, along with regional presidents Thomas Barkin and Susan Collins also speak on Wednesday.

“The events of the last few days (have) seen markets try and absorb the fact that rate cuts might have to wait until much later in the year, and what any delay means for asset prices and valuations,” CMC Markets chief market strategist Michael Hewson said.

“While Powell’s candour in ruling out a rate cut in March caught markets by surprise this week also offers an opportunity to see if other members of the FOMC share his mindset.

In an interview at the weekend, Fed Chair Jerome Powell said the central bank could be “prudent” on the timing of rate cuts.

The probability of a U.S. rate cut as early as May now stands at just 39%, when it was considered a done deal only a week ago.

Futures imply around 122 basis points of easing for all of 2024, down from 145 basis points last week.

Treasuries came under pressure, leaving 10-year note yields up 4 basis points at 4.13%.

The dollar rose 0.1% to 148.13 yen , just shy of its recent 10-week peak at 148.90. The euro edged up 0.1% to $1.077 , while gold eased 0.1% to $2,033 an ounce , having fallen to $2,013.70 early in the week.

Oil prices found support from a U.S. Energy Department assessment that U.S. output would grow by 170,000 barrels per day (bpd) in 2024, instead of a previous estimate of 290,000 bpd.

Brent rose 0.7% to $79.14 a barrel, as did U.S. crude , at $73.85.