By Jaspreet Kalra
MUMBAI (Reuters) – Global shares gained on Wednesday and the dollar steadied ahead of key U.S. inflation data which could impact the Federal Reserve’s policy outlook, while geopolitical uncertainty lifted oil prices and kept gold near record highs.
The pan-European STOXX 600 rose 0.4% and equity futures pointed to a positive start on Wall Street, a day after the S&P 500 and Nasdaq posted new record closing highs.
European shares were led higher by gains in Spanish fast-fashion giant Inditex, and Novo Nordisk which rose following the Wegovy maker’s announcement of restructuring steps, including job cuts.
Buoyant equities and steady currency markets appeared to largely sidestep geopolitical worries spurred by Israel’s attack on Hamas leadership in Qatar on Tuesday and after Poland scrambled its own and NATO air defences to shoot down drones following a Russian air attack on western Ukraine.
Poland’s blue-chip index was down 1.5%, one of the few regional indices in the red in Europe.
“The Pavlovian response of investors has been to fade geopolitical risk,” said Ben Laidler, head of equity strategy at Bradesco BBI, referring to pullbacks spurred by previous geopolitical flare ups that proved to be attractive entry points for investors.
The broader market sentiment remains bullish despite multiple risks and some of that could be finding an expression in hedges via gold, Laidler said.
Gold lingered close to its record high hit in the previous session. It was last up 0.8% at $3,654.36 per ounce. It has risen over 5% so far in September, also helped along by firming of Fed rate cut wagers.
“Prospects of continued accommodative monetary policy, increasing geopolitical tensions, ongoing macroeconomic challenges, and concerns over the Fed’s independence are expected to strengthen the investment case for gold,” analysts at ANZ said in a note.
Traders see a rate cut by the Fed next Wednesday as a sure thing, and even lay 8% odds on a super-sized half-point reduction, the CME Group’s FedWatch Tool shows.
The final hurdles to those expectations will come on Wednesday and Thursday, in the form of producer and consumer inflation readings, respectively.
Analysts reckon that an upside surprise could spur investors to lighten bets on rate cuts later this year but is unlikely to meaningfully change expectations for September.
Markets took in their stride a court ruling that temporarily blocked President Donald Trump from removing Federal Reserve Governor Lisa Cook, a case which is likely to end up before the Supreme Court.
Investors are keenly following the legal battle as it could upend the central bank’s long-held independence.
Meanwhile, Stephen Miran, a top White House economic advisor, is expected to clear a U.S. Senate hurdle on Wednesday, advancing his nomination as Federal Reserve governor.
U.S. Treasury bonds declined for a second day on Wednesday, pushing yields higher. The 10-year Treasury yield ticked up to 4.0932%, after climbing almost 3 basis points on Tuesday. Bond yields rise when prices fall.
The focus this week is also on the European Central Bank’s policy decision due on Thursday. It is widely expected to keep rates unchanged.
“We see slightly negative euro risks around the ECB’s September meeting, with our economists expecting a slightly dovish press conference, also given ECB market pricing. But we would not expect this meeting to be much of an event for FX,” analysts at BofA Global Research said in a note.
The euro was last steady at $1.1705 but rose by as much as 0.5% against the Polish zloty to 4.268 zloty, its biggest one-day rise in three months.
The U.S. dollar index, which measures the currency against six others, eased slightly to 97.78, paring earlier small gains.
In commodities, Brent crude futures rose 0.7% to $67 a barrel, while U.S. West Texas Intermediate crude futures gained 0.8% to $63.13.
U.S. President Donald Trump urged EU officials on Tuesday to hit China and India, both major purchasers of Russian oil, with tariffs of up to 100% as part of a strategy to pressure Russian President Vladimir Putin.
(Reporting by Jaspreet Kalra and Kevin Buckland; Editing by Kim Coghill and Ros Russell, Kirsten Donovan)
