Stock markets mostly rose Wednesday as traders battled to maintain momentum in this week’s rally despite worries about an extended period of elevated interest rates.
Investors are focusing on second-quarter results from Nvidia, whose processors have become a hot commodity as tech firms pile into developing artificial intelligence (AI) applications.
European markets were higher in midday trading despite data showing Britain’s economic activity contracting for the first time in six months while the downturn in the eurozone deepened. The data led to a drop in bond yields, an indication of borrowing costs.
Asian markets shrugged off a mostly lower close on Wall Street on ratings downgrades for US banks as higher interest rates weigh on lenders.
Sentiment has taken a hit in recent weeks owing to a spike in US Treasury yields to around 15-year highs, fuelled by expectations that a strong economy will force the Federal Reserve to stick to its campaign of monetary tightening.
That has forced investors to push back their expectations of when borrowing costs will eventually come down — just a few months ago, they were betting on a cut by the end of the year.
All eyes are on a planned speech Friday by Fed chief Jerome Powell, with dealers hoping for some clarity on its plans to keep inflation on a downward path and confirmation of the central bank’s two percent target.
Forecasts are for a reiteration of his previous remarks that the goal is taming prices, even with rates already at 22-year highs.
“It’s not the height of rates that matters as much as how long they stay high,” said Tom Essaye, founder and president of Sevens Report Research.
“If we see Powell hint at higher for longer on Friday, we will need to brace for more equity market volatility.”
