NEW YORK/LONDON (Reuters) -Global equities rose to a more than two-year high and the S&P 500 touched a record peak on Wednesday, as strong earnings offset jitters related to U.S. regional banks and China markets.
Bonds were under modest pressure, as comments from Federal Reserve officials reaffirmed expectations that the central bank may not soon cut rates.
The MSCI world equity index, which tracks shares in 49 nations, gained 0.37% by 10:11 a.m. EST (1511 GMT) after hitting its highest since mid-January 2022. Markets got a boost from a rally in Chinese blue-chips.
On Wall Street, the Dow Jones Industrial Average rose 0.25% to 38,619.03, the S&P 500 gained 0.48% to 4,978.24 and the Nasdaq Composite added 0.48% to 15,683.15.
“We are at the midpoint of the 4Q earnings reporting season, and we would say that there has been more good news than bad,” Arthur Hogan, chief market strategist with B. Riley Wealth, said in a morning note.
The U.S. regional banking sector remained a concern as Moody’s downgraded New York Community Bancorp 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.
Chinese regulators continued efforts to steady markets, placing further curbs on short selling and state investors said they were expanding their stock buying plans. President Xi Jinping would discuss the stock market with financial regulators, Bloomberg News reported, though there was no confirmation this had happened or what was discussed.
The head of China’s securities regulator was replaced on Wednesday, according to Xinhua news agency, 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, equities were under pressure with STOXX 600 index down 0.17% and Europe’s broad FTSE Eurofirst 300 index down 0.19%.
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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.
The dollar index, which tracks the greenback against a basket of major currencies, was down at 104.08.
The yield on benchmark 10-year Treasury notes rose to 4.0999% from 4.092% previously. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 4.3932%, versus its Tuesday close of 4.408%.
Oil prices gained after data showed U.S. crude inventories grew less than expected. Brent crude futures rose 0.41% , or $0.32, to $78.91. U.S. crude rose 0.45%, or $0.33, to $73.64 a barrel. [O/R]
(Additional reporting by Harry Robertson in London and Wayne Cole in Sydney;Editing by Emelia Sithole-Matarise, Chizu Nomiyama and Ros Russell)
