World stocks pause near five-month peaks, caution sets in

LONDON, Jan 25 (Reuters) – Signs that central banks may need to raise interest rates for longer have dampened optimism that aggressive monetary policy among major central banks is almost over. .

Australia’s dollar rose 0.7 percent to a five-month high after inflation rose to a 33-year high of 7.8 percent in the last quarter. .

Canada’s central bank is widely expected to raise interest rates again later on Wednesday, with strong recent data supporting expectations for another move.

Trading in European stocks was sluggish, with the broader Euro STOXX 600 (.STOXX) down 0.3%. US stock futures point to a soft open for Wall Street, .

Globally, stocks have posted strong gains this year after a rout in 2022, amid rising inflation and expectations that US interest rates will rise. China’s easing of covid restrictions and the reopening of its borders boosted investor sentiment.

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MSCI’s world stock index ( .MIWD00000PUS ) has risen more than 6 percent this month and settled near a five-month high on Wednesday.

“Our view is that the move in risk assets is overdone,” said Guy Miller, chief market strategist at Zurich Insurance Group.

“Broadly speaking, our problem is that the economy is getting worse, and the data we’re looking at points in that direction.”

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) hit a seven-month high. Trading volumes were subdued as Chinese and Taiwanese markets were still closed for the Lunar New Year holiday.

Shares in Microsoft ( MSFT.O ) gave up most of the 4% gains posted in after-hours trading. The tech titan’s better-than-expected results showed some strength in the face of a weak economy, but weak earnings growth signaled tougher times ahead for the sector.

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Microsoft said Wednesday it was investigating a networking issue that affected multiple services.

Aussie dollar surges

The Australian dollar rose to $0.7123 in currency markets after the latest inflation data. Australia’s currency is up nearly 2% this week, poised for its biggest weekly jump in two months.

Investors sharply downplayed the prospect of the RBA raising the cash rate by a quarter point to 3.35% when it meets on February 7. Previously, some analysts had thought the RBA was likely to pause its tightening campaign.

“The RBA has been increasing the cash rate by 25 basis points per meeting and we do not believe this will change,” ING analysts said in a note.

The euro was around $1.0887, well below a recent nine-month high.

Data showing German business sentiment brightened in January is now not seen as reason enough to lift the single currency.

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Germany’s Ifo Institute said its business climate index rose to 90.2, in line with consensus, up from 88.6 in December, according to a Reuters poll of analysts.

The New Zealand dollar fell after New Zealand reported annual inflation of 7.2% in the fourth quarter, below the central bank forecast of 7.5%.

Brent crude futures rose 0.4% to $86.46 a barrel after falling 2.3% in the previous session, as oil prices rose. West Texas Intermediate (WTI) US crude was up 0.3% at $80.36 after falling 1.8% on Tuesday.

Gold prices fell 0.5 percent to $1,928 an ounce from the previous session’s nine-month high.

Reporting by Dhara Ranasingha; Additional reporting by Anshuman Daga in Singapore; Editing by Mark Potter

Our standards: Thomson Reuters Trust Principles.

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