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US stocks gained strongly on Wednesday after a survey pointed to a slowdown on US business activity, fueling hopes that the Federal Reserve will limit further hikes in interest rates to curb inflation.
The benchmark S&P 500 rose 0.7 percent in morning trade, while the Nasdaq Composite rose 1.2 percent.
S&P Global’s Flash US Composite PMI index, a measure of manufacturing and services activity, fell from 52 in July to 50.4 in August, its biggest drop since November. A reading below the neutral 50 mark indicates that most businesses that responded to the survey reported an overall contraction in their activity.
Big tech stocks tumbled earlier this month as strong US economic data signaled to investors that the Federal Reserve could keep interest rates higher for longer in an attempt to ease persistent price pressures.
Investors were also positive on US tech industry giant Nvidia’s earnings after the closing bell today. The chip maker, whose stellar earnings forecasts helped fuel this year’s rally in technology stocks related to artificial intelligence, gained 1.5 percent at the open.
Investors will be closely watching this weekend’s economic conference in Jackson Hole, Wyoming, where Fed Chairman Jay Powell is expected to hint at the central bank’s future path of monetary tightening.
Meanwhile, German bond yields and the euro fell on Wednesday after a survey on eurozone business activity came in less than expected and traders bet a slowing economy would force the central bank to hold off on interest rate hikes.
The yield on the policy-sensitive two-year German Bund fell 0.1 percentage point to 2.99 percent after the HCOB Flash Eurozone Composite Purchasing Managers’ Index fell to a 33-month low of 47 in August. The number was lower than the previous month’s 48.6 and below the market expectation of 48.5.
The yield on the 10-year bund, the regional benchmark, fell 0.11 percentage points to 2.54 per cent. Bond yields rise as prices fall. The euro slipped 0.1 percent to $1.082 against the dollar.
The ECB last raised interest rates by a quarter percentage point to 3.75 percent in July, a level not seen since 2001.
Based on data compiled by Refinitiv and interest rate derivatives prices, traders on Wednesday pegged a 51 percent chance that the ECB will go ahead with a quarter-point rate hike at the next policy meeting.
The survey also capped gains in the region’s stock markets as traders wondered whether it would pressure the European Central Bank to halt its campaign of raising interest rates across the 20-nation bloc.
The region-wide Stoxx Europe 600 gained 0.3 per cent, giving back some of its early gains. France’s CAC 40 turned negative, down 0.1 percent while Germany’s DAX was down 0.1 percent.
Meanwhile, Asian markets were mixed on Wednesday, with China’s CSI 300 down 1.6 per cent and South Korea’s Kospi down 0.4 per cent, while Hong Kong’s Hang Seng gained 0.3 per cent and Japan’s Topix gained 0.5 per cent.