Global Stocks Surge as Federal Reserve Signals End of Rate Hike Cycle: Market Highlights

Global stocks experienced a remarkable surge as investors responded to indications from the Federal Reserve, suggesting that interest rates have peaked after a 16-month policy-tightening cycle. The optimistic sentiment drove significant gains in European and US markets, with prominent companies reporting strong earnings results.

In premarket trading, Facebook parent Meta Platforms Inc. surged an impressive 9% after surpassing forecasts with its results and revenue projections, while chipmakers led by Micron Technology Inc. advanced on the back of their high-bandwidth memory products’ development.

Buoyed by a spectrum of earnings beats from companies like BNP Paribas SA, Nestle SA, and Carrefour SA, Europe’s Stoxx Europe 600 index reached a two-month high, contributing to the overall bullish momentum.

In the US, the dollar rebounded from losses as latest data confirmed the resilience of the world’s largest economy, with second-quarter GDP growth surpassing forecasts at an annualized rate of 2.4% compared to the predicted 1.8%. Moreover, durable goods orders showed a sharp increase, while initial weekly jobless claims decreased. Investors are increasingly confident that the Federal Reserve has concluded its rate-hiking activities.

Market experts note that the Fed’s data-dependent approach and indications of curbing price pressures through higher borrowing costs have reassured investors, leading to a reduction in bets on further interest rate increases this year.

Timothy Graf, head of EMEA macro strategy at State Street Bank & Trust Co., emphasized that the belief of the Fed being done with rate hikes is prevalent among investors. Additionally, the US economy’s stronger performance compared to consensus outlook has positively influenced market sentiment.

Furthermore, expectations of an earnings recession failed to materialize, with equity moves indicating that investors were underinvested in significant themes that generated returns this year, according to Graf. This positive sentiment contributes to the prevailing market optimism.

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Global Stocks Surge as Federal Reserve Signals End of Rate Hike Cycle: Market Highlights

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