European shares rise as investor sentiment steadies

Shares rose in Europe on Wednesday as investor sentiment continued to steady after a rout last month, but the advance was capped by concerns over how fast central banks will raise interest rates to quell soaring inflation.

Stellar earnings from Google parent Alphabet after Wall Street closed on Tuesday lifted US stock futures as crude oil rose and the dollar eased.

In Europe, the STOXX index (.STOXX) of 600 companies rose 0.5 per cent to 477 points, and was up for a third straight session, to recoup nearly half its January losses.

Wall Street closed higher on Tuesday. In Asia, a number of markets, including China, were closed for the Lunar New Year holidays.

“There is a nice decent read across from positive finish last night on Wall Street, but we remain in ranges and not really going anywhere ahead of the central bank meetings,” said Michael Hewson, chief markets analyst at CMC Markets.

Markets are pricing in a string of rate hikes from the Fed and the Bank of England, Hewson said. The BoE meets on Thursday, as does the European Central Bank. The ECB has scotched talk of rate hikes despite two being priced into markets.

“You can make the point that the ECB message is not in any way credible given inflationary pressures in the euro zone,” Hewson said.

Wednesday’s euro zone core consumer prices index, due at 1000 GMT, could add to the bond market’s torments, ING bank said in a note.

Fed officials sought to play down the chance of a half-point rake hike in March. Though he said he sees three successive hikes starting in March, St Louis Fed President James Bullard pushed back at the idea of an initial half-percentage point hike.

Friday’s non-farm payroll figures in the United States will also be closely watched.

US stock indexes wavered before ending the session higher on Tuesday, with the Dow Jones Industrial Average (.DJI) rising 0.78 per cent, the S&P 500 (.SPX) gaining 0.69 per cent and the tech-heavy Nasdaq Composite (.IXIC) adding 0.75 per cent.

Google parent Alphabet Inc (GOOGL.O) reported record quarterly sales that topped expectations after the bell on Tuesday, sending the company’s shares up by more than 8 per cent in after-hours trading.

Strong earnings from Sony in Japan and Spanish bank Santander on Wednesday also helped sentiment in stocks. Facebook parent Meta reports earnings later on Wednesday.

S&P 500 futures were 0.4 per cent firmer, and the tech-laden Nasdaq futures were 1.15 per cent higher.

Global equities in January had their worst month since March 2020, at the height of the initial wave of the COVID-19 pandemic, Deutsche Bank research showed.

OIL EYES OPEC+

Oil prices were near last week’s seven-year highs as a draw in US crude stocks confirmed strong demand and a lack of supply, but investors remained cautious ahead of an OPEC+ meeting later on Wednesday.

“The main concern for the market is that many members are unable to deliver on their quotas due to a lack of spare capacity as a result of years of underinvestment,” analysts at UniCredit bank said.

Brent crude was flat at $89.13 a barrel. US West Texas Intermediate crude was also little changed at $88.22 ahead of the OPEC+ meeting.

The bond market sell-off that has upended financial markets since the start of the year stalled on Tuesday, with benchmark US 10-year Treasury yields hovering near their lowest levels in a week.

Benchmark US 10-year Treasury yields edged lower to 1.7769, limiting losses in non-interest bearing bullion. Spot gold (.XAU) dipped 0.2 per cent to $1,796 per ounce.

Treasury yields, which move inversely to prices, rose by some measures at their fastest pace since 2009 in January as investors began pricing in the possibility that the Fed could raise interest rates as many as five times this year.

As the dollar eased, risk-sensitive currencies such as the Australian dollar, euro, and British pound gained. The dollar index fell 0.108 per cent, with the euro up 0.12 per cent to $1.1283.