Stocks resume advance as investors assess rate rise outlook

Global stocks turned higher on Thursday, resuming an advance from the start of the week as investors searched for cut-price opportunities after three straight quarters of equity losses.

A FTSE gauge of worldwide shares added 0.3 per cent, with Europe’s regional Stoxx 600 rising 0.8 per cent in early London dealings. Futures contracts tracking Wall Street’s S&P 500 edged up 0.2 per cent.

The broad S&P had closed down 0.2 per cent on Wednesday, trimming steeper losses from earlier in the session, in a short pause after an upbeat start to the new month. On Monday and Tuesday, US stocks had posted their strongest two-day advance since the depths of the pandemic more than two years ago — propelled higher by cautious optimism among market participants after the longest streak of quarterly declines since the 2008 financial crisis.

Equities have sold off this year as central banks, captained by the US Federal Reserve, tighten the screws on monetary policy to curb persistently high inflation. Concerns have intensified in recent months that the Fed and its peers will raise interest rates into a protracted slowdown, squeezing demand to the extent that they induce a global recession.

Against that backdrop, investors have closely scrutinised economic reports and data releases for clues about how much further rate-setters can hoist borrowing costs in the face of dwindling growth.

A worse than expected report on US job openings on Tuesday had eased concerns over interest rate rises, fuelling a rally in Wall Street equities at the start of the new month. The level of heat in the labour market is widely seen as a key influence on Fed decision-making, with signs of weakness inspiring hopes that the central bank will act with less vigour to contain inflation.

Fresh data on Thursday will offer further clues about the state of unemployment in the world’s largest economy, with first-time jobless claims expected to come in at 203,000 for the week ending October 1 — up from 193,000 a week earlier. The widely followed monthly jobs report from the labour department is due on Friday.

Government debt markets came under renewed pressure in European morning dealings, with the yield on the 10-year UK gilt adding 0.03 percentage points to 4.06 per cent as its price slipped lower. The gilt market was last week gripped by crisis as the new British government’s “mini” Budget sparked fears over the extent of borrowing required to fund extensive tax cuts. The intensity of the selling eased last Wednesday, when the Bank of England intervened to calm the turmoil — but dealings have been volatile in the days since.

The equivalent 10-year US yield, seen as a global benchmark for borrowing costs, added 0.03 percentage points to 3.79 per cent.

In currencies, the dollar was flat after advancing more than 1 per cent in the previous session, in a move that had weighed on an already stumbling pound. Sterling added 0.2 per cent on Thursday to $1.13, remaining above the levels it traded at before UK chancellor Kwasi Kwarteng unveiled his fiscal plans on September 23.

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