• World Bank says no to rate hike • Nikkei jumps 7.7% • Paradigm shift in equity markets • Fund managers higher on the FTSE 100 • US markets expected to open higher European stocks charged higher for a third day on Wednesday. Hopes of stimulus in China have lifted global markets out of the doldrums this week. Japan’s Nikkei was the flag-bearer with a huge 7.7% rally, the biggest one-day percentage gain in seven years. It’s still fear rather than fundamentals driving markets. On the way down its fear of losses but on the way up its fear of missing out. World Bank chief economist Kaushik Basu’s view that a Federal Reserve rate hike would trigger “panic and turmoil” echoes that of IMF head Christine Lagarde. Top officials publically coming out against a rate hike will make it harder for Janet Yellen to move in September. The outsized daily price swings in equity benchmarks suggest there has been a paradigm shift. It’s not clear that this latest rally can survive the next bout of disappointing data from China or hawkish Fed comments. We’re clearly no longer in an environment of modest corrections of 5% in equity indices than can easily bought in expectation of easy to come by new record highs. Of course markets could see new records, but it’s likely to be a tougher road to tread than in the past six years. Mining, oil and financial companies led the rally on the FTSE 100. A broker upgrade for Hargreaves Lansdown made its shares a top rider while Schroders and Old Mutual moved up in sympathy. GlaxoSmithKline was on the few fallers on the FTSE after a failed respiratory drug trial for partner company Theravance. Ryanair shares leaped by 8% after the company upgraded its full year forecast by 25%. Like EasyJet who just upped their own full year forecast, Ryanair has benefited from more UK holiday makers tempted to foreign shores by poor British weather in August, a stronger pound and lower fares thanks to the drop in oil prices. As the icing on the cake, budget carriers like Ryanair could benefit from extra custom from disgruntled Lufthansa passengers facing another pilot strike. The British pound was lower after UK industrial production unexpectedly dropped in August by -0.4% when a gain of 0.1% was forecast. The weak data follows disappointing PMIs last week and points to a summer slowdown for UK manufacturers. The pickup in global sentiment looks like it will hit the shores of the US with a higher open expected on Wall Street. USA pre-opening levels S&P 500: 20 points higher at 1,989 Dow Jones: 169 points higher at 16,661 Nasdaq: 54 points higher at 4,357. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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