Stocks rise, US yields fall as markets await Fed rate hike

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A general view shows the board of the German stock price index DAX during afternoon trading as markets react to the coronavirus disease (COVID-19) at the Frankfurt Stock Exchange, in Germany, March 25, 2020. REUTERS/Ralph Orlowski/Files

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NEW YORK/MILAN, May 3 (Reuters) – A gauge of global stock markets edged higher on Tuesday as 10-year U.S. Treasury yields fell 3% amid investor caution ahead of the biggest rate hike in one day expected by the US Federal Reserve. since 2000.

In a sign of the Fed’s challenge to rein in rising consumer prices, data showed U.S. job openings hit a record high in March as worker shortages persisted, suggesting employers could raise wages in a move that would likely fuel inflation. Read more

The Fed is expected to raise rates by half a percentage point at the end of a policy meeting on Wednesday and soon begin trimming assets. The US central bank raised its key rate by 25 basis points in March.

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The main stock indexes in Europe rose, as did the three major indexes on Wall Street. The MSCI gauge of stocks across the world (.MIWD00000PUS) gained 0.23% and the pan-European STOXX 600 index (.STOXX) rose 0.09% after surviving a “flash crash” in markets on Monday Nordics caused by a sell order transaction by Citigroup.

“We could get a dead cat bounce after the Fed meeting if it’s not more hawkish than the market feared,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office, adding that anxiety investors was high.

“Potentially there could be a short-term bounce, but I think the overall trend is still very cautious on the equity side.”

Overnight in Asia, Australia’s central bank raised its key rate 25 basis points more than expected, pushing the Australian dollar up to 1.3% and hitting local equities.

On Thursday, the Bank of England is expected to raise rates for the fourth consecutive time.

In Asia, stocks were mostly flat in thinned holiday trading as markets in China and Japan were closed. But in Hong Kong, shares of Alibaba (9988.HK) fell 9% on concerns over the status of its billionaire founder Jack Ma.

A state media report that Chinese authorities had taken action against a person surnamed Ma hit the headline hard, but he recouped the losses after the report was edited to clarify he was not the company founder. Read more

Hong Kong’s Hang Seng Index (.HSI) rose 0.1% and South Korea’s KOSPI (.KS11) fell 0.3%. Australia’s S&P/ASX 200 index (.AXJO) fell 0.4% as the central bank raised rates and announced further hikes to contain inflation.

The yield on 10-year Treasury bills fell 7.4 basis points to 2.922%.

The yield on the benchmark note fell 3% after hitting the key psychological milestone for the first time since December 2018 on Monday.

The dollar fell against a basket of major currencies as investors weighed how much of the Fed’s expected decision to raise rates this week and beyond was already priced in.

The dollar, which has been supported by safe-haven buying amid concerns over the economic outlook, remained just below the nearly two-decade high hit in April and the euro stabilized above from the lowest level in more than five years than last month.

The dollar index fell 0.222%, while the euro rose 0.31% to $1.0537. The Japanese yen strengthened 0.20% to 129.89 per dollar.

Elsewhere in the currency markets, the Australian dollar jumped after the central bank raised its benchmark rate by 25 basis points to 0.35%, the first hike in more than a decade. He also signaled more rate hikes to come as he lifts the curtain on a massive pandemic-related stimulus. Read more

The Aussie rose 0.9% to $0.712, with the majority of analysts in a Reuters poll expecting a rise of just 0.25%.

Oil fell as worries about demand due to prolonged COVID lockdowns in China outweighed support for a possible European oil embargo on Russia over the war in Ukraine.

U.S. crude fell 0.77% to $104.36 a barrel and Brent to $106.86, down 0.67% on the day.

London copper prices fell to their lowest level in three months as COVID-19 restrictions in top consumer China and the prospect of aggressive rate hikes in the United States stoked concerns about a weaker global growth that would hit demand for metals.

Benchmark copper on the London Metal Exchange fell 2.5% to $9,525.50 a tonne.

Gold strengthened, following a slight decline in US Treasury and dollar yields, as investors eyed an aggressive rate hike from the Fed on Wednesday.

Spot gold added 0.6% to $1,874.38 an ounce.

Bitcoin fell 0.64% to $38,272.79.

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Reporting by Herbert Lash, additional reporting by Danilo Masoni in Milan; Editing by Alexander Smith and Bernadette Baum

Our standards: The Thomson Reuters Trust Principles.

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