World stocks edge above Nov 2020 lows, sterling recovers some ground

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  • The dollar has eased since its 20-year highs reached on Monday
  • German 10-year bond yields hit near 11-year highs
  • Oil rebounds from Monday’s nine-month lows

LONDON/HONG KONG, Sept 27 (Reuters) – Global stocks rebounded on Tuesday after hitting a 21-month low and the pound rebounded after hitting a record low against the dollar a day earlier in the framework UK tax cut plans as market declines faltered.

US S&P futures rebounded 0.94% after Wall Street fell deeper into a bear market on Monday, benchmark 10-year Treasury yields fell from the 12-year high of the previous session and the dollar eased off 20-year highs on a basket of currencies.

Markets remain jittery, however, after US Federal Reserve officials said on Monday that their priority remains controlling domestic inflation. Read more

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“US rate expectations have risen quite significantly,” said Andrew Hardy, investment manager at Momentum Global Investment Management, although he added that “there is already a huge drop prices in the markets”.

Markets are pricing in a 76% chance of another 75 basis point move at the Federal Reserve’s next meeting in November.

Among the central bank speakers on Tuesday are Fed Chairman Jerome Powell and ECB President Christine Lagarde.

The MSCI Global Equity Index (.MIWD00000PUS) rose 0.29% after hitting its lowest level since November 2020 on Monday. European stocks gained more than 1% and Britain’s FTSE (.FTSE) increased by 0.6%.

The pound slumped to a record low of $1.0327 on Monday as government tax cut plans announced on Friday came on top of huge energy subsidies.

The British currency recovered 4.6% from its low at $1.0801 on Tuesday.

After the pound’s plunge, the Bank of England said it would not hesitate to change interest rates and was watching the markets “very closely”. Read more

Bank of England chief economist Huw Pill will speak at a panel at 11:00 GMT.

A lack of confidence in the government’s strategy and its funding also hammered gilts on Friday and again on Monday.

The yield on five-year gilts rose 100 basis points in two trading days, although it slipped on Tuesday.

“(It’s) definitely something that’s unfolding…we’re probably just at some early stage to see how the market digests this kind of information,” said Yuting Shao, macro strategist at State. Street Global Markets.

“Of course, the tax cut plan itself was really aimed at stimulating growth, at reducing household burdens, but it raises the question of its implications in terms of monetary policies.”

The fallout from Britain kept other assets on edge.

The bond sale in Japan pushed yields up to the Bank of Japan’s ceiling and prompted more unexpected central bank buying in response.

The yield on German 10-year bonds briefly hit a new near 11-year high at 2.142%.

US 10-year bond yields fell 3.2 basis points after hitting a Monday high of 3.933%.

The broadest MSCI index of Asian stocks outside of Japan (.MIAPJ0000PUS) hit a new two-year low before rebounding 0.5%. Japan’s Nikkei (.N225) was up 0.5%.

The dollar index fell 0.13% to 113.72, after hitting 114.58 on Monday, its highest level since May 2002.

Europe’s single currency rose 0.24% on the day to $0.9629 after hitting a 20-year low a day ago.

Oil rose more than 1% after plunging to its lowest level in nine months a day earlier, amid indications that the OPEC+ producer alliance could enact production cuts to avoid another collapse in price.

U.S. crude gained 1.4% to $77.70 a barrel. Brent crude rose 1.27% to $85.20 a barrel.

Gold, which hit a 2.5-year low on Monday, rose 0.8% to $1,634 an ounce.

Bitcoin surged above $20,000 for the first time in about a week as cryptocurrencies rebounded along with other risk-sensitive assets. Read more

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Reporting by Xie Yu; Editing by Edmund Klamann, Muralikumar Anantharaman and Raissa Kasolowsky

Our standards: The Thomson Reuters Trust Principles.

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