Stocks bouyant ahead of Fed update

·3-min read
Investors appread to be soothed for now about news that troubled Evergrande had reached an agreement over repaying interest on its domestic bond (AFP/Noel Celis)

Stock markets were buoyant Wednesday, bouncing off recent sharp losses as concerns eased over Chinese property giant Evergrande ahead of a key update from the Federal Reserve.

The dollar also gained against most of its biggest rivals, while oil prices won solid support.

Nerves were settled by news that Evergrande had agreed a plan to repay interest on one of its key bonds, avoiding a default that many fear could hammer the domestic and global economy.

However, confidence remains at a premium as traders awaited the outcome later Wednesday of a meeting of the Federal Reserve, which could announce a timetable to start tapering its vast monetary easing programme.

Analysts generally expected the Fed would hint at ending stimulus but overall hedge on its outlook and not announce any major moves.

"Having seen some very bad days for equities in recent sessions, Europe and parts of Asia were more upbeat on Wednesday," said AJ Bell investment director Russ Mould, who suggested the Fed outcome "could give further support to markets."

- More hawkish Fed? -

But ThinkMarkets analyst Fawad Razaqzada warned "volatility" could return to the markets in the event of "a hawkish tilt from the Fed, which may trigger some risk aversion."

"The later tapering starts, the better it will likely be for risk assets -– and gold," said Razaqzada, who added that, "overall, there is greater risk that the Fed will come across as being more hawkish than in June."

The US central bank's meeting comes against the ever-present backdrop of spiking coronavirus infections and slowing global growth.

But despite those concerns, the Dow Jones index rose more than 1.2 percent and the tech-heavy Nasdaq added 1.0 percent two hours into trading on Wall Street while Frankfurt, London and Paris all closed in the black.

Fed officials have signalled that by the end of the year they will begin winding down the ultra-loose monetary policies put in place at the start of the pandemic which have been key to driving a global economic and equity-prices recovery.

The growing consensus is that the first announcement will be in November and the first reduction the next month. But Fed boss Jerome Powell could still provide details on the timetable.

The decision comes as the Fed tries to keep a lid on surging inflation and prevent the recovering economy from overheating.

On the corporate front, shares in Entain rose more than five percent after the UK gambling giant revealed that it had received a takeover bid from US rival DraftKings worth $22.5 billion.

- Key figures around 1600 GMT -

New York - Dow: UP 1.2 percent at 34,337.82 points

London - FTSE 100: UP 1.5 percent at 7,083.37 (close)

Frankfurt - DAX: UP 1.0 percent at 15,506.74 (close)

Paris - CAC 40: UP 1.3 percent at 6,637.00 (close)

EURO STOXX 50: UP 1.1 percent at 4,145.32

Tokyo - Nikkei 225: DOWN 0.7 percent at 29,639.40 (close)

Shanghai - Composite: UP 0.4 percent at 3,628.49 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Euro/dollar: UP at $1.1736 from $1.1724 at 2045 GMT

Pound/dollar: DOWN at $1.3658 from $1.3659

Euro/pound: UP at 85.92 pence from 85.82 pence

Dollar/yen: UP at 109.62 yen from 109.21 yen

Brent North Sea crude: UP 1.8 percent at $75.71 per barrel

West Texas Intermediate: UP 1.8 percent at $71.77 per barrel

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