Economy 3 MIN READ

Global equities, US yields gain ahead of Fed, corporate results

July 25, 2023By Reuters

Global equity markets and US Treasury yields rose on Tuesday ahead of the Federal Reserve’s expected interest rate hike and as markets awaited a stream of quarterly results from corporate heavyweights.

Fed officials are gathering for their July monetary policy meeting, starting on Tuesday, where the central bank’s rate-tightening cycle will be top of the agenda. Most market participants expect the Fed to deliver a 25 basis-point rate hike when the meeting concludes on Wednesday.

US Treasury yields advanced, with benchmark 10-year notesĀ rising to 3.890% while rate-sensitive two-year notes were up at 4.8806%.

Google owner AlphabetĀ and Microsoft are among US technology giants whose quarterly earnings on Tuesday give investors a glimpse of the health of the US economy. The performance of these megacap tech companies underlies the nearly 19% year-to-date rally in the benchmark S&P 500.

After the bell on Tuesday, Alphabet said second-quarter profit exceeded Wall Street expectations. Microsoft on Tuesday surpassed Wall Street estimates for fourth-quarter revenue and profit as its cloud business benefited from product upgrades featuring new artificial intelligence (AI) technology.

“There’s a bit of catch-your-breath mentality before what could really be a big market moving event with the big Fed meeting tomorrow,” said Ryan Detrick, chief market strategist at Carson Group.

“At the same time, the Fed is important but corporate earnings matter. Overall, it’s been fairly positive and people expect earnings to come in better than expected,” Detrick said.

The MSCI All-World index, which tracks equities in more than 50 countries, rose 0.47%.

Europe’s STOXX 600 gained 0.48%, led in part by shares in mining companies, which rallied after China’s leaders pledged to bolster their sputtering economy.

On Wall Street, the three main indexes closed higher, led by gains in shares of technology, materials, and communication services companies.

The Dow Jones Industrial Average rose 0.08% to 35,438.07, the S&P 500 gained 0.28% to 4,567.46 and the Nasdaq CompositeĀ added 0.61% to 14,144.56.

“A 25 basis-point hike is pretty much baked in but clearly what matters more is whether (in Fed Chair Jerome Powell’s press conference) it’s going to be a dovish or hawkish hike,” Detrick added.

Oil prices rose to three-month highs as signs of tighter supplies and pledges by Chinese authorities lifted sentiment.

Brent futures settled up 1% at USD 83.64 a barrel after hitting USD 83.87 earlier, the highest level since April 19. US West Texas Intermediate (WTI) crude rose 1% to settle at USD 79.63.

The US dollar weakened, losing earlier session gains, ahead of the Fed meeting as well as rate decisions from other key central banks, including the European Central Bank and the Bank of Japan. The dollar index fell 0.128%, with the euro down 0.1% to USD 1.1051.

Gold prices strengthened as the dollar fell. Spot gold added 0.5% to USD 1,964.34 an ounce, while US gold futures GCc1 gained 0.07% to USD 1,961.70 an ounce.

(Reporting by Chibuike Oguh in New York. Editing by Sharon Singleton and Matthew Lewis)

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