# Hopes of slowdown in rate hikes bolster shares ahead of U.S. GDP
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-26
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Investors Optimistic Ahead of Central Bank Meetings Next
Meta Description: Investors optimistic ahead of central bank meetings next week, expecting a slowdown in rate hikes, easing recession fears and boosting corporate earnings.
URL: https://financedigest.com/hopes-of-slowdown-in-rate-hikes-bolster-shares-ahead-of-u-s-gdphtml

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By Huw Jones

LONDON (Reuters) – Stocks firmed on Thursday as investors bet that central banks meeting next week will signal a slowdown or even a pause in interest rate hikes for later in the year to make recession less likely and ease pressure on corporate earnings.

[Oil prices](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") were steady after U.S. crude stocks rose less than expected, while gold [hit a 9-month](https://www.financedigest.com/factory-shutdown-to-hit-barry-callebaut-after-9-month-sales-rise.html "Factory shutdown to hit Barry Callebaut after 9-month sales rise") peak.

The [dollar wobbled](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks") near an eight-month low against its peers as a gloomy fourth-quarter earnings season continued ahead of U.S. Federal Reserve, European Central Bank, and Bank of England meetings next week, with all three expected to continue [hiking interest rates](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike").

Ahead of that, the Commerce Department is due to releaseadvance estimates of U.S. fourth-quarter gross domestic productlater on Thursday, with expectations that strong [growth continued](https://www.financedigest.com/different-employee-engagement-outcomes-for-u-s-and-canadian-companies-amidst-continued-economic-growth-pressures.html "DIFFERENT EMPLOYEE ENGAGEMENT OUTCOMES FOR U.S. AND CANADIAN COMPANIES AMIDST CONTINUED ECONOMIC GROWTH Pressures") in the final months of 2022.

Stocks rose on Wednesday after the Bank of Canada became the first major central bank to say it was ready to pause or [end its tightening cycle](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle"), with markets now hoping that other central banks will hint next week at a similar mindset, analysts said.

Ultimately a pause is a hell of a lot different from what markets are pricing in, which is a [cut by the end](https://www.financedigest.com/hp-to-cut-about-12-jobs-by-end-of-fiscal-2025.html "HP to cut about 12% jobs by end of fiscal 2025") of this year,” said Mike Hewson, chief markets strategist at CMC Markets.

“This narrative is more wishful thinking than anything else.”

The MSCI all country stock index was up 0.2% at 644.68 points, just [short of Monday’s high for the year](https://www.financedigest.com/twenty-years-cash-isas-uk-fallen-short-expectations-alternatives.html "Twenty years on, cash ISAs in the UK have fallen short of expectations: what are the alternatives?"), with the benchmark now 6% up for 2023.

In Europe, the STOXX index of 600 leading companies was up 0.5%, leaving it up about 6% for the year, erasing about [half of last year’s](https://www.financedigest.com/an-apple-a-year-half-of-iphone-users-will-upgrade-to-the-iphone-7.html "AN APPLE A YEAR: HALF OF IPHONE USERS WILL UPGRADE TO THE IPHONE 7") losses.

What the market is really looking for is what the Fed will say next week in terms of how many hikes they have in mind,” Laureline Renaud-Chatelain, fixed income strategist at Pictet [Wealth Management](https://www.financedigest.com/wealth-management-consultant.html "Wealth management consultant"), who expects a 25-basis point hike at next week’s Fed meeting.

[Markets are expecting rate](https://www.financedigest.com/instant-view-ecb-sticks-with-big-rate-hike-even-as-bank-fears-roil-markets.html "Instant View: ECB sticks with big rate hike even as bank fears roil markets") cuts later this year and while there is momentum in stocks, the unfolding fourth-quarter results season is disappointing in parts, leading to corrections in earnings expectations, Renaud-Chatelain said.

We believe the Fed will make a [special effort to avoid](https://www.financedigest.com/scam-special-how-to-avoid-christmas-shopping-fraud-this-year.html "Scam Special: How to Avoid Christmas Shopping Fraud this Year") suggesting that the end of the tightening process is in sight,” said Kevin Cummins, chief economist at NatWest Markets.

U.S. stock index futures were slightly firmer.

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/01/chart-1.jpg)

SEVEN-MONTH HIGH

Asian equities rose to a fresh seven-month high, with [Hong Kong](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") shares playing catch-up to other markets’ gains as trade resumed after its three-day Lunar New Year holiday.

MSCI’s broadest index of Asia-Pacific [shares outside Japan climbed 1.1% and was set for its fifth straight day of gains](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook").

The index has gained 10% so far in January, buoyed by expectations of a strong economic rebound in China and by hopes that most major central banks are [nearing an end](https://www.financedigest.com/exclusive-nissan-seeks-tech-tie-up-without-renault-as-alliance-nears-end-of-road.html "Exclusive-Nissan seeks tech tie-up without Renault as alliance nears end of road") to hefty rate rises.

The spotlight will be on the U.S. GDP [data due later](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") on Thursday. The report could mark the last quarter of solid growth before the lagged effects of the [Fed’s jumbo rate hikes](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") kick in.

“The U.S. GDP release today will be of key interest to gauge whether the market expectations shifting in favour of a [soft landing](https://www.financedigest.com/stocks-dollar-gain-on-soft-landing-hopes.html "Stocks, dollar gain on soft landing hopes") rather than a recession can continue to hold,” Saxo strategists said in a note to clients.

[Hong Kong’s Hang Seng Index surged 2.4% in its first day of trade in the Year](https://www.financedigest.com/hong-kong-finance-official-to-make-first-visit-to-britain-in-three-years.html "Hong Kong finance official to make first visit to Britain in three years") of the Rabbit, while Japan’s Nikkei fell 0.12%.

In the currency market, the dollar index, which measures the U.S. [currency against six major](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades") rivals, was at 101.70, not far off the eight-month low of 101.51 it touched last week.

The [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") strengthened 0.15% to 129.76 per dollar, while sterling was last trading at $1.2393, down 0.06% on the day.

The [yield on 10-year Treasury notes eased](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") to 3.454%, while the yield on the 30-year Treasury bond was lower at 3.6092%.

A closely watched part of the U.S. Treasury [yield curve measuring the gap between yields on two- and 10-year Treasury](https://www.financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loom.html "Wall St indexes mixed, Treasury yields tick up as higher rates loom") notes, seen as an indicator of economic expectations, was at -67.70 bps. The inversion of this curve has predicted eight of the last nine recessions, analysts have said.

[Oil prices](https://www.financedigest.com/oil-prices-rise-on-u-s-drawdown-chinese-fears-weigh.html "Oil prices rise on U.S. drawdown, Chinese fears weigh") were steady after U.S. crude stocks rose less than expected. U.S. West Texas Intermediate (WTI) crude was slightly firmer at $80.2 per barrel, while Brent was at $86.05, down 0.08% on the day. \[O/R\]

Gold prices touched a nine-month high, with spot gold at $1,941 per ounce, after hitting $1,949.09 earlier in the day.

(Reporting by Huw Jones, additional reporting by Ankur Banerjee; Editing by Edwina Gibbs, Kim Coghill and Nick Macfie)


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