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Stocks gyrate, dollar gains as Fed keeps hawkish stance

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Stocks recoup losses after Putin’s nuclear threat; Fed keeps dollar buoyant By Reuters

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Economy 3 hours ago (Sep 21, 2022 16:57)

© Reuters. Visitors walk past Japan’s Nikkei stock prices quotation board inside a conference hall in Tokyo, Japan September 14, 2022. REUTERS/Issei Kato/File Photo

By Herbert Lash and Amanda Cooper

NEW YORK/LONDON (Reuters) -Global equities rose on Wednesday, rebounding from an early hit to risk appetite when Russian President Vladimir Putin accused the West of “nuclear blackmail,” sparking a flight to safe-haven assets like gold and bonds.

Oil prices briefly rose on concerns an escalating Ukraine war will tighten oil and gas supply, while the dollar strode higher on expectations that the Federal Reserve will announce a big interest rate hike at 2 p.m. (1800 GMT).

European stocks pared early losses and rose. U.S. equities rallied ahead of the Fed’s rate hike and an accompanying statement that investors hope will provide a clue as to how high rates will go next year.

“Putin’s move has contributed to the firmer dollar and weaker euro ahead of the FOMC meeting. There already was risk-off,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “Putin pushed on an open door.”

Geopolitical developments like Putin’s Ukraine escalation will overhang the markets through the fall and winter, said Tom Di Galoma, managing director at Seaport Global Holdings LLC.

“Markets are going to be very sensitive to this type of rhetoric from both China and from Russia,” he said. “This (Ukraine) is going to go on for probably a number of years and may get darker before it gets completely resolved.”

On Wall Street, the Dow Jones Industrial Average rose 0.54%, the S&P 500 gained 0.53% and the Nasdaq Composite added 0.31%.

In Europe, the pan-regional STOXX 600 index rose 0.54% and MSCI’s gauge of stocks worldwide gained 0.19%.

Ultimately what the Fed does and what other central banks are set to do is more important than Putin’s saber rattling,, said CMC chief markets strategist Michael Hewson said.

“At the moment, the No. 1 enemy is inflation obviously,” Hewson said. “The primary goal at the moment for central banks is to try to tame the inflation genie and that really needs to be at the forefront of their focus.”

Putin ordered a Russian mobilization of reserves to fight in Ukraine and made a thinly veiled threat to use nuclear weapons, in what NATO called a “reckless” act of desperation in the face of Russia’s looming defeat.

Putin effectively announced plans for annexation of four Ukrainian regions through referendums and said, with no evidence, that Western officials had threatened to use nuclear weapons against Russia.

{{2126|The dodollar index, which measures the greenback’s value against other major currencies, rose to its highest level since 2002 at 110.89. The euro weakened 0.76% to $0.9894, sliding further below parity, and the Japanese yen fell 0.29% at 144.13 per dollar.

Benchmark 10-year Treasury yields eased from 11-year highs as bonds unwound most of their previous session’s gains. Yields moved back up toward this week’s multi-year highs that have been driven by central banks determined to quell rising inflation.

More than a dozen central banks announce policy decisions this week, including the Bank of Japan and Bank of England.

German 2-year yields, the most sensitive to rate expectations, jumped 3 basis points to a new 11-year high of 1.765%.[GVD/EUR] The 10-year Treasury yield, which touched 3.604% on Tuesday for the first time since April 2011, was last down 2 basis points at 3.5534%.

But with fears mounting about the potential for another blow to global energy supply, crude oil and natural gas prices rose, giving a lift to shares of major producers.

Oil prices gave up early gains as a soaring dollar and global recession fears offset worries about a Russian military mobilization.

U.S. crude fell 0.37% to $83.63 per barrel and Brent was at $90.47, down 0.17% on the day.

Spot gold added 0.2% to $1,666.99 an ounce.

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