LONDON — Chipmakers boosted stock markets on Thursday, helping ease investor concerns over a potentially quick recession due to impending rate hikes, as the euro struggled near 20-year parity with the safe haven dollar.
The pound rose 0.6% after reports that British Prime Minister Boris Johnson would step down following a series of ministerial resignations, after hitting a 2-year low on Wednesday amid political uncertainty. The FTSE blue chip index in London gained 0.9%.
Crude oil fluctuated either side of $100 a barrel as tight supply and demand concerns jostled for market attention.
Semiconductor companies rose in Europe after South Korea’s Samsung posted its best second-quarter profit in four years. Stability in US stock futures also supported European equities.
The STOXX index of 600 European companies rose 1.2% to 412 points, still down about 16% from its record high of six months ago.
The MSCI Global Share Index rose 0.4%, having lost about a fifth of its value so far this year.
Kevin Thozet, member of the investment committee at Carmignac asset management, said US economic data pointed to slowing economic growth, but not an impending recession.
“Markets are potentially exaggerating recession risk or recession is coming very quickly,” Thozet said, adding that investors were looking to utility-type businesses like pharmaceuticals, which are less susceptible to downturns.
“We collectively buy what we need more than what we want,” Thozet said.
Elsewhere in Europe, the euro sought to recover from its nearly two-decade low against the greenback.[FRX/]
“The euro is in freefall and we haven’t heard any official comments from the European Central Bank. It’s like they’re locked in a bunker,” Thozet said.
“It’s not just about recession, it’s about darkness in Europe,” added Chris Weston, head of research at brokerage Pepperstone in Melbourne.
Unlike the Bank of England and the Federal Reserve, the ECB has yet to start raising interest rates despite record eurozone inflation, but the central bank is expected to raise rates by 25 basis points later this month.
“They could go up 50 basis points and potentially they should,” Thozet said.
DUO OF FED SPEAKERS
S&P 500 futures rose 0.4%, indicating a steady start on Wall Street later in the session.
Benchmark US 10-year yields were last at 2.942%, up slightly on the day after falling from an over-11-year high of 3.498% on June 14.
The yield curve, measured by the spread between two-year and ten-year US bond yields, continued to invert, a sign that bond markets suspect aggressive rate hikes to keep inflation under control.
“The coincidence of fairly warm labor market data and much more resilient ISM services…further reinforces the idea that the Fed is unlikely to slow the pace and intensity of tightening,” the economist said. of Mizuho, Vishnu Varathan.
“The next litmus test for the direction of yields … will be speeches from Bullard and Waller – which should shed more light on the thinking of the hawkish camp within the (Fed),” said Jan Nevruzi, rates strategist at NatWest Markets.
“Are they leaning into recession fears or are they continuing to push that the Fed needs to move above neutral as quickly as possible and contain inflation, whatever the cost to growth? “
St Louis Fed President James Bullard and Fed Governor Christopher Waller are both due to speak at 5:00 p.m. GMT, although Friday’s US payrolls data is also eagerly awaited. .
Asian equities posted incremental gains, with MSCI’s broadest index of Asia-Pacific stocks outside Japan rising 1% from a two-month low.
Japan’s Nikkei closed 1.47% higher, while South Korea’s KOSPI gained 1.8%, its best day in nearly two weeks, with Samsung Electronics one of the biggest movers after announced earnings guidance suggesting a rebound for its chip business.
The Australian and New Zealand dollars scraped off their lowest level in two years, gaining 0.51% and 0.54% respectively.
Brent crude futures fell below $100 a barrel at the start of the Asian session but rallied and last settled at $101.23, up 0.5% on the day but down almost 10% on the week so far.
Shanghai copper stabilized but fell 20% in a month as investors worried about demand for the industrial metal.