Stocks regain ground, dollar maintains strength

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© Reuters. FILE PHOTO: Passersby wearing protective masks are reflected on an electronic board displaying stock prices outside a brokerage amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan, September 29, 2021. REUTERS/Issei Kato

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By Matt Scuffham and Carolyn Cohn

NEW YORK/LONDON (Reuters) -Global stock markets continued to regain ground Thursday and the dollar stayed close to a one-year high on growing expectations the U.S. Federal Reserve will tighten policy in the coming months.

Earlier in the week, global stock markets suffered their worst rout since January. A heavy sell-off in tech stocks on Tuesday had consigned Wall Street to its steepest drop since mid-July.

Stock indices in the United States staged a partial recovery Wednesday and continued to advance on Thursday.

The Dow Jones Industrial Average rose 51.85 points, or 0.15%, to 34,442.57, the S&P 500 gained 16.71 points, or 0.38%, to 4,376.17 and the Nasdaq Composite added 98.06 points, or 0.68%, to 14,610.50.

MSCI’s gauge of stocks across the globe gained 0.29%.

Federal Reserve Chair Jerome Powell said on Wednesday that resolving “tension” between high inflation and still-elevated unemployment is the most urgent issue facing the Fed right now, acknowledging the U.S. central bank’s two goals of stable prices and full employment are in potential conflict.

The prospect of inflation has helped the greenback to end the quarter on a positive note, and it remained close to one-year highs Thursday.

“In the currency markets, there are expectations that the Fed will tighten, and the dollar is a safe asset,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

The dollar index fell 0.055%, with the euro down 0.03% to $1.1591.

The yield on 10-year Treasury notes was little changed, having risen sharply earlier in the week.

Benchmark 10-year notes last fell 1/32 in price to yield 1.541%, from 1.539% late on Wednesday.

The pan-European STOXX 600 index rose 0.07%

Electricity prices in France are expected to rise around 12% by February, French environment minister Barbara Pompili said on Thursday, highlighting inflationary pressures sweeping across Europe.

French inflation hit a near 10-year high of 2.7% in September, official numbers showed, coming in slightly less than forecast. Italy’s annual inflation rate rose to 3.0%.

“This is not a broad-based inflationary spiral,” Oxford Economics analysts wrote in a note, though they added there was “little relief in sight for the record high energy prices in the coming months, with the severity of this winter a key factor”.

Germany’s 10-year government bond yield was little changed at -0.208%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.24% after several days of losses, but was still set for a 4.5% monthly decline and a 9.3% loss on the quarter.

That would be the benchmark’s worst quarter since the first three months of 2020, as COVID-19 raged across Southeast Asia and investors worried about slowing global growth with China a particular concern.

China’s economy has been hit by regulatory curbs in the tech and property sectors and is now grappling with a power shortage.

Data published on Thursday showed China’s factory activity unexpectedly shrank in September, but services returned to expansion as COVID-19 outbreaks receded.

However, analysts say slowing growth would pressure authorities to ease policy. That provided battered Chinese markets with some respite, with blue chips rising 0.67%.

Shares in embattled developer China Evergrande, meanwhile, were down 3.9%.

The company missed paying bond interest due on Wednesday, two bondholders said, missing its second offshore debt payment in a week, although the cash-strapped company made a partial payment to some of its onshore investors.

The Nikkei lost 0.31% a day after Japan’s ruling party chose softly spoken consensus-builder Fumio Kishida as its new leader and the country’s new prime minister.

Oil prices fell amid rising U.S. crude oil inventories and the strong dollar.

U.S. crude recently fell 1.86% to $73.44 per barrel and Brent was at $77.76, down 1.12% on the day.

Spot gold added 0.7% to $1,738.45 an ounce. U.S. gold futures gained 1.01% to $1,738.90 an ounce.

Stocks regain ground, dollar maintains strength

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