World shares hit a three-week high on Wednesday as strong US corporate earnings and the expected resumption of Russian gas supply to Europe allayed fears of a recession, though the dollar hovered near two-week lows on lower US rate hike expectations.
Russian gas flows via the Nord Stream 1 pipeline are seen restarting on time on Thursday after the completion of scheduled maintenance, sources told Reuters this week, soothing investors' concerns about gas supply to Europe in tat-for-tat measures in response to the Ukraine conflict.
Markets still expect a large 75-basis-point interest rate rise from the US Federal Reserve next week to rein in white-hot inflation. But this represents a rowback from previous expectations of 100 bps.
In contrast, Reuters reported European Central Bank policymakers are mulling raising rates by a bigger-than-expected 50 basis points on Thursday.
"At the margins there is some good news like Nord Stream," said Luca Paolini, chief strategist at Pictet Asset Management.
"Overall, there is no reason why the market should rally that much, but it springs from inflation expectations."
S&P 500 futures and Nasdaq futures both rose more than 0.4%, after stronger-than-expected results from U.S companies overnight including Netflix Inc.
The S&P 500 gained 2.8% on Tuesday while the tech-heavy Nasdaq Composite added 3.1%.
MSCI's world stock index gained 0.36% after rising 2% on Tuesday.
European stocks were steady and Britain's FTSE 100 rose 0.54%, lifted by oil and mining stocks and shrugging off data showing UK inflation at a new 40-year high.
The euro gained 0.14% to $1.0236, after racking up its biggest one-day percentage gain in a month in the previous session on rising rate hike bets.
The dollar was steady at 106.67 against an index of currencies, close to two-week lows hit in the previous session.
"A further bounce in risk assets is quite possible but we think it is too early to shift from a defensive stance. The greenback will likely remain on the front foot into 3Q22." said Sim Moh Siong, senior currency strategist at Bank of Singapore.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1%, driven by a 1.65% jump in resources-heavy Australia and a 1.4% gain in Hong Kong stocks. Japan's Nikkei surged 2.67%.
Chinese shares rose 0.34%, lagging gains in other markets, as the central bank kept its benchmark lending rates unchanged amid a shaky economic recovery from Covid lockdowns.
The Bank of Japan also delivers a policy decision on Thursday, but is not expected to make any changes to its ultra-easy stance.
A closely-watched part of the US yield curve remained inverted, with the two-year yield last at 3.1979%, down from the previous close of 3.2310%.
The yield on benchmark 10-year Treasury notes stood at 2.9874%, compared with its close of 3.019% on Tuesday.
German 10-year bond yields fell 4 bps to 1.235%.
Oil prices slumped more than $1 a barrel, pressured by global central bank efforts to tame inflation and ahead of expected builds in US crude inventories as product demand weakens.[O/R]
US crude fell 1.75% to $102.40 a barrel while Brent crude dropped 1.5% to $105.73 per barrel.
Spot gold eased 0.2% to $1,708 an ounce.