World shares hit three-week high

·3-min read

World shares hit a three-week high on Wednesday as strong US corporate earnings and the expected resumption of Russian gas supply to Europe allayed fears of a recession, though the dollar hovered near two-week lows on lower US rate hike expectations.

Russian gas flows via the Nord Stream 1 pipeline are seen restarting on time on Thursday after the completion of scheduled maintenance, sources told Reuters this week, soothing investors' concerns about gas supply to Europe in tat-for-tat measures in response to the Ukraine conflict.

Markets still expect a large 75-basis-point interest rate rise from the US Federal Reserve next week to rein in white-hot inflation. But this represents a rowback from previous expectations of 100 bps.

In contrast, Reuters reported European Central Bank policymakers are mulling raising rates by a bigger-than-expected 50 basis points on Thursday.

"At the margins there is some good news like Nord Stream," said Luca Paolini, chief strategist at Pictet Asset Management.

"Overall, there is no reason why the market should rally that much, but it springs from inflation expectations."

S&P 500 futures and Nasdaq futures both rose more than 0.4 per cent, after stronger-than-expected results from U.S companies overnight including Netflix Inc.

The S&P 500 gained 2.8 per cent on Tuesday while the tech-heavy Nasdaq Composite added 3.1 per cent.

MSCI's world stock index gained 0.36 per cent after rising 2.0 per cent on Tuesday.

European stocks were steady and Britain's FTSE 100 rose 0.54 per cent, lifted by oil and mining stocks and shrugging off data showing UK inflation at a new 40-year high.

The euro gained 0.14 per cent to $US1.0236 ($A1.4820), after racking up its biggest one-day percentage gain in a month in the previous session on rising rate hike bets.

The dollar was steady at 106.67 against an index of currencies, close to two-week lows hit in the previous session.

"A further bounce in risk assets is quite possible but we think it is too early to shift from a defensive stance. The greenback will likely remain on the front foot into 3Q22." said Sim Moh Siong, senior currency strategist at Bank of Singapore.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.0 per cent, driven by a 1.65 per cent jump in resources-heavy Australia and 1.4 per cent gain in Hong Kong stocks. Japan's Nikkei surged 2.67 per cent.

Chinese shares rose 0.34 per cent, lagging gains in other markets, as the central bank kept its benchmark lending rates unchanged amid a shaky economic recovery from COVID-19 lockdowns.

The Bank of Japan also delivers a policy decision on Thursday, but is not expected to make any changes to its ultra-easy stance.

A closely-watched part of the US yield curve remained inverted, with the two-year yield last at 3.1979 per cent, down from the previous close of 3.2310 per cent.

The yield on benchmark 10-year Treasury notes stood at 2.9874 per cent, compared with its close of 3.019 per cent on Tuesday.

German 10-year bond yields fell 4 bps to 1.235 per cent.

Oil prices slumped more than $US1 ($A1.4) a barrel, pressured by global central bank efforts to tame inflation and ahead of expected builds in US crude inventories as product demand weakens.

US crude fell 1.75 per cent to $US102.40 ($A148.26) a barrel while Brent crude dropped 1.5 per cent to $US105.73 ($A153.08) per barrel.

Spot gold eased 0.2 per cent to $US1,708 ($A2,473) an ounce.

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