© Reuters. FILE PHOTO: An electronic board shows stock indexes at the Lujiazui financial district in Shanghai, China, March 21, 2023. REUTERS/Aly Song/File Photo
By Naomi Rovnick and Stella Qiu
SYDNEY (Reuters) -Global shares inched higher on Friday after data showed the U.S. economy was growing robustly and a U.S. core inflation report signalled price pressures are continuing to abate.
MSCI’s all-country equity gauge rose 0.2% following reassuring news on Thursday that the U.S. economy expanded at its fastest rate for almost two years in the third quarter, while the European Central Bank (ECB) also held interest rates steady.
Futures tracking Wall Street’s tech-heavy added 0.8% in response to Amazon (NASDAQ:) beating sales estimates. Europe’s share index was 0.3% lower.
The yield on the 10-year U.S. Treasury, which moves inversely to the price of the debt security and functions as a benchmark for global borrowing costs, rose 2 basis points (bps) to 4.845% after scaling 5% earlier in the week
A report on Friday showed U.S. core personal consumption expenditure, the U.S. Federal Reserve’s favoured inflation measure, declined to 3.7% in September from 3.9% a month earlier.
Still, bond markets held off applauding the news ahead of the Federal Reserve’s interest rate setting meeting next week and as oil prices climbed in response to geopolitical tensions.
“This is a bond market that at the moment doesn’t need much of an excuse to fire a tantrum,” said Simon Harvey, head of FX analysis at Monex Europe.
“In the current environment, uncertainty for monetary policymakers has increased significantly,” added Martin Wolburg, senior economist at Generali (BIT:) Investments.
Amid growing concerns that the Israel-Hamas conflict could spread, two U.S. fighter jets struck weapons and ammunition facilities in Syria on Friday in retaliation for attacks on U.S. forces by Iranian-backed militia.
futures climbed 1.9% to $89.71 a barrel on Friday, now about 5% higher since Hamas militants burst out of Gaza to attack southern Israel on Oct. 7.
The , which can hit stock prices when it rises by varying the discount rate investors use to value companies’ future cashflows, has climbed from around 4% in early August.
The Fed is widely expected to keep its funds rate in a range of 5.25%-5.5% next week, although chair Jay Powell has said a strong economy and tight jobs market could warrant more rate rises.
The ECB on Thursday also held its deposit rate at a record high of 4%, although president Christine Lagarde signalled in comments after the decision that further monetary tightening was possible.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.1% higher after hitting a fresh 11-month low on Thursday.
In currency markets, the euro was steady at 1.0556 per dollar, now down almost 14% in the last three months.
Thanks to rate rises and a robust U.S. economy, the index that measures the dollar’s strength against competing currencies has risen almost 5% in three months and was on Friday on track for a 0.5% weekly gain.
The yen hit a fresh one-year low of 150.77 per dollar overnight and was last at 149.89. That put it not far off the three-decade low of 151.94 it touched in October last year that led Japanese authorities to intervene to prop up the currency.
In recent weeks the Bank of Japan (BoJ) has also intervened heavily in its bond market to suppress yields, pitting itself against market forces as global rates have risen.
The BoJ will face pressure at its meeting next week to shift away from bond yield control, with any nod to tighter Japanese policy potentially strengthening the yen and encouraging domestic investors to sell overseas assets.