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Stocks Mostly Higher Despite Renewed Rate Hike Worries

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European and US equity markets mostly rose Thursday as investors bet on whether the Federal Reserve would keep raising US interest rates to combat stubbornly-high inflation. online news

Wall Street stocks made modest gains in late morning trading after initial claims for jobless benefits ticked higher, suggesting the US monetary policymakers have room to pause their campaign of rate hikes.

Fresh data on the US labour market showed first-time claims for unemployment benefits rose modestly to 261,000 last week, the highest level for more than a year and a half.

The data fuelled “speculation that the labour market is finally starting to respond to the impact of past rate hikes and spike in inflation,” said market analyst Fawad Razaqzada at City Index.

“The key takeaway from the report is the bump seen in initial claims as it connotes some softening in the labour market that the Fed will like to see,” said analyst Patrick O’Hare, although he noted they are also lower than during previous recessions.

Strong job creation and low unemployment have been one reason the Fed has hesitant to let up on interest rates, with policymakers fearful that strong wage gains could fuel further inflation.

The dollar weakened further against its main rivals after the data.

Eurozone indices closed higher despite data showing the bloc entered recession at the start of the year, but London stocks fell.

Asian equities closed mixed while oil prices turned lower.

Tokyo finished down as the yen bounced on data showing Japan’s economy expanded more than initially thought in the first quarter.

Market watchers were taken by surprise this week by rate hikes from the Australian and Canadian central banks.

With the pair still concerned by elevated inflation, there is concern that the Federal Reserve could prolong its tightening at its policy meeting next week, heaping more pressure on a struggling global economy.

“Canada and Australia don’t often have a central role in moving the markets but the decision by both countries’ central banks to resume rate hikes this week has reverberated through the financial system and helped stoke fears about sticky inflation,” said AJ Bell investment director Russ Mould.

“Much of the narrative sustaining the uneven if material rally in stocks this year has been that the battle with inflation is nearly won by the central banks.

“If the Federal Reserve follows the lead of its Australian and Canadian counterparts then this could be badly undermined and the next Fed decision is now just a week away,” Mould added.

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The Reserve Bank of India held rates Thursday, as expected.

Equities have enjoyed a broadly healthy run higher this month with data suggesting the US economy is holding up after 10 straight rate hikes, but cooling enough for the Fed to possibly pause rate hikes.

By contrast, weak trade figures out of China as well as subdued German industrial production have dampened sentiment.

Observers said the People’s Bank of China could announce a rate cut as early as this month, having this week asked major lenders to lower their deposit rates.

And reports last week said officials were looking to ease some rules in the property sector, where a number of firms are straining under the weight of massive debts.

Key figures around 1530 GMT

New York – Dow: UP 0.3 percent at 33,757.51 points

London – FTSE 100: DOWN 0.3 percent at 7,599.74 (close)

Frankfurt – DAX: UP 0.2 percent at 15,989.96 (close)

Paris – CAC 40: UP 0.3 percent at 7,222.15 (close)

EURO STOXX 50: UP 0.1 percent at 4,297.68 (close)

Tokyo – Nikkei 225: DOWN 0.9 percent at 31,641.27 (close)

Hong Kong – Hang Seng Index: UP 0.3 percent at 19,299.18 (close)

Shanghai – Composite: UP 0.5 percent at 3,213.59 (close)

Euro/dollar: UP at $1.0779 from $1.0696 on Wednesday

Pound/dollar: UP at $1.2547 from $1.2431

Dollar/yen: DOWN at 138.99 yen from 140.24 yen

Euro/pound: DOWN at 85.90 percent from 86.03 pence

Brent North Sea crude: DOWN 1.0 percent at $76.17 per barrel

West Texas Intermediate: DOWN 1.2 percent at $71.63 per barrel


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