Global stocks higher on hopes for avoiding recession

By JOE McDONALD
AP Business Writer

BEIJING (AP) — Global stock markets rose Thursday amid hopes Western economies can avoid a recession despite higher interest rates to cool inflation.

London, Frankfurt and Hong Kong advanced. Tokyo declined. Markets in China, India and Australia were closed for holidays.

Wall Street futures were higher after U.S. markets closed Wednesday little changed.

The Commerce Department was due to issue its first of three estimates for U.S. economic growth in October-December later Thursday. The economy likely rolled out of 2022 with momentum, registering decent growth in the face of painful inflation, high interest rates and rising concern that a recession may be months away.

Economists have estimated that the gross domestic product — the broadest measure of economic output — grew at a 2.3% annual pace in the last quarter.

Investors are optimistic the United States and European economies can evade a recession despite warnings by the Federal Reserve and other central bank officials that interest rates will be kept elevated for an extended period to cool economic activity and inflation.

“There’s increasing confidence the economy may not require a recession to tame the inflation beast,” said Stephen Innes of SPI Asset Management in a report.

In early trading, the FTSE 100 in London gained 0.3% to 7,764.96. The DAX in Frankfurt advanced 0.3% to 15,136.67 and the CAC 40 in Paris added 0.7% to 7,092.34.

On Wall Street, the future for the benchmark S&P 500 index was 0.4% higher. That for the Dow Jones Industrial Average was up 0.2%.

In Asia, the Hang Seng in Hong Kong surged 2.4% to 22,566.78. The Nikkei 225 in Tokyo shed 0.1% to 27,362.75.

The Kospi in Seoul gained 1.7% to 2,468.65 after South Korea’s economic output shrank by 0.4%, as expected, in the final quarter of 2022 from the previous quarter.

Manila’s main index lost 0.3% after the Philippine economy grew by 7.2% over a year earlier in the final three months of 2022.

New Zealand, Singapore and Jakarta advanced while Bangkok and Kuala Lumpur declined.

On Wall Street, the S&P 500 index lost less than 0.1% on Wednesday after rebounding from a morning loss of 1.7%.

The Dow recovered from a similar drop to end up less than 0.1%. The Nasdaq composite fell 0.2%.

Analysts are forecasting S&P 500 companies will report their first drop in quarterly earnings per share since 2020 at the start of the coronavirus pandemic.

Microsoft helped to lead the way lower after forecasting lower earnings than expected. It fell 4.6% early in the day but recovered to end down 0.6%.

Texas Instruments lost 1.1% after the company said it expects weaker demand across all its market outside of automotive. It was down as much as 3.1% at one point.

Traders expect the Fed to raise its benchmark lending rate by another 0.25 percentage points at its next update on Feb. 1. That would be another reduction in the margin of increase from 0.5 percentage points last month and four hikes of 0.75 points earlier.

Many investors expect the Fed to ease off rate hike plans as economic activity cools and start to cut rates before the end of this year. The Fed has said it expects to keep rates high at least through the end of the year to extinguish inflation.

In energy markets, benchmark U.S. crude rose 38 cents to $80.53 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 2 cents on Wednesday to $80.15. Brent crude, the price basis for international oil trading, 22 cents to $86.41 per barrel in London. It retreated 1 cent the previous session to $86.12.

The dollar gained to 129.61 yen from Wednesday’s 129.55 yen. The euro rose to $1.0918 from $1.0913.