NEW YORK- Global equity markets surged on Monday as easing recession fears and hopes of a less aggressive Federal Reserve buoyed sentiment, while the likelihood of more jumbo interest rate hikes in Europe pushed the euro to a nine-month peak against the dollar.
Gains in chipmakers boosted beaten-down US tech stocks as the market priced in a 95.8 percent probability of the Fed raising rates by 25 basis points to a range of 4.50 percent to 4.75 percent on Feb. 1.
Easing fears of a recession also helped lift equities, as they did in the euro zone, despite expectations the European Central Bank will hike rates by 50 basis points both on Feb. 2 and in March, according to a Reuters poll of economists.
The start of a big week for US corporate earnings is expected to test a recent bounce in tech and other growth stocks as companies discuss their outlook amid a slowing economy.
Stocks are rallying as people mistakenly believe a proximate change in Fed policy will resolve worries about higher rates and their impact on the economy, said Jason Pride, chief investment officer of private wealth at Glenmede in Philadelphia.
“We are already at a point where if we stick at these numbers and hold them for a period of time, it is not good for the economy,” said Pride, referring to rates that he believes are now “restrictive” and squeezing economic growth.
“This is like other market rallies that we’ve seen within an ongoing bear market in that you have these periods of optimism seep in because people think that the story is changing enough that the problem is gone,” he said. — Reuters
