Global stocks rally, dollar drops as U.S. inflation data spurs optimism Global stocks rallied as the dollar and bond yields slid further on Tuesday after more data signaled U.S. inflation was coming off its peak, while an improving outlook for China’s economy gave investors plenty to cheer. Currencies gained against the greenback as the euro, yen and sterling all rose and the Canadian dollar hit an eight-week high after the Labor Department reported U.S. producer prices increased less than expected in October. Economists polled by Reuters had forecast monthly PPI rising 0.4% and advancing 8.3% year-on-year. The reading was better than expected and bolstered the risk-off mood sparked last week by cooler-than-expected data on U.S. consumer prices that gave investors hope the Federal Reserve can curb its aggressive interest rate hikes to tame inflation. Also Read| Global Markets: Global stocks rise and dollar falls, with focus on Fed and China “The market is sniffing out the end of the Fed rate hike cycle,” said Peter Duffy, chief investment officer of credit at Penn Capital Management Co LLC in Philadelphia. “The market is taking a big sigh of relief because the Fed has had to talk so tough. As soon as these numbers can start coming down, even if it’s a slow walkdown in inflation, the market will be relieved.” Fed funds futures showed a further drop from above 5% last week in expectations for the U.S. central bank’s target rate, pricing in a peak at 4.88% next May and June. The likelihood the Fed hikes 50 basis points in December rose to a 91% probability, up from 71.5% last week. MSCI’s gauge of stocks across the globe gained 1.55%, while its emerging markets index rose 2.35%. On Wall Street, the Dow Jones Industrial Average rose 1.09%, the S&P 500 gained 1.64% and the Nasdaq Composite added 2.44%. Big moves in the dollar, among other assets, suggested investors were dramaticly changing their positions after the CPI and PPI reports, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “The pace and the momentum speaks to a major turn, and the euphoria!” he said. “It’s like a big push on an open door. The pull-back we’ve seen, the dollar sells off last week sharply, some of the currencies were three standard deviation moves.” The euro up 0.53% to $1.038 and the yen strengthened 0.48% versus the dollar at 139.22. The benchmark 10-year Treasury yield fell to a six-week low of 3.758% and was last down 5.5 basis points to 3.812%. The 10-year has fallen 30 basis points since Thursday. Two-year yields, which reflect interest rate expectations, fell as low as 4.326%. “Markets are driven by two factors at the moment. One is optimism that inflation data in the U.S. is peaking out … and on top of that we’ve had growing optimism that we could see China adopt more growth-friendly policies,” said Lee Hardman, currency analyst at MUFG in London. Chinese and Hong Kong stocks rallied overnight as investors digested China’s COVID-19 policy adjustments, a property sector rescue package, and a cooling in tensions between the U.S. and China. Beijing last week eased some of its strict COVID rules, though there has been a sharp increase in new infections in some cities this week. Hong Kong’s Hang Seng Index surged 4.11% overnight. The index is up nearly 25% for the month while China’s CSI 300 has gained 10% in that time. U.S. President Joe Biden and Chinese President Xi Jinping held a three-hour meeting on Monday in Bali on the sidelines of the G20 gathering. Investors welcomed the two countries’ pledge of more frequent communications. The market is reading that the Biden-Xi meeting is a watershed, but the U.S. still sanctions Chinese semiconductors and Canada is getting tougher on Chinese investments in Canadian mining and metals sectors, Chandler said. Also read:IMF says global economic outlook getting ‘gloomier’, risks abound Data out on Tuesday showed that the British unemployment rate rose in September. German business sentiment saw a stronger-than-expected rise in the closely watched ZEW survey. U.S. crude fell 1.25% to $84.80 per barrel and Brent was at $92.09, down 1.13% on the day. Bitcoin rose 2.69% to $17,036.00, but remained around 20% lower for the month. The collapsed FTX crypto exchange outlined a “severe liquidity crisis” in bankruptcy filings released on Tuesday.
The Japanese pharma major is also filing a plea before the Delhi HC seeking appointment of forensic auditors to analyse transactions involving IHH, Fortis Healthcare and RHT, Singapore, as directed by the HC on October 18.
The development is likely to create legal hurdles and delay the proposed open offer as IHH had recently told FE that it could only go ahead if Sebi agreed with its legal interpretation that the SC’s September 22 order has lifted all such restraints.
IHH managing director and CEO Kelvin Loh told FE on November 9 that the company would like to go ahead with the open offer “as soon as possible” as there has already been a delay of four years. Ravi Rajagopal, chairman of Fortis Healthcare, had added that their legal counsel has advised that the company can go ahead with the open offer as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal had said.
However, legal observers told FE that the matter is not that straightforward and simple as the Delhi HC has to take the final call on the matter of open offer as well as whether a forensic audit has to be done in the share sale which was executed in 2018.
Also Read: IHH to float open offer for Fortis if Sebi concurs with our legal view: MD & CEO
Loh and Rajagopal had said the possibility that the matter may take a different turn when it comes up in Delhi HC cannot be ruled out.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders as required under the law.
Daiichi has written to Sebi that the SC in its September 22 order had asked the HC to consider ordering a forensic audit into the dilution of FHL shareholding, repeated violation of undertakings and assurance by former FHL promoters — Malvinder and Shivinder Singh — and the transaction between FHL, IHH and the clandestine transfer of Rs 4,666 crore to RHT Singapore.
Daiichi is “severely prejudiced” with IHH’s clandestine attempt to subvert the status quo order directed by the SC on December 14, 2018, and September 22 with respect to the conduct of forensic audit and the pending proceedings before the HC by purportedly consulting regulatory authorities, including Sebi, on the proposed FHL-IHH transaction. It has reiterated that the FHL-IHH transaction was currently sub-judice before the HC where FHL is also a party, its solicitors, P&A Law Offices, have said in the letter.
“We further state that any such attempt by FHL and/or IHH to proceed with the FHH-IHH transaction would be in direct contravention of the HC and SC orders,” the letter sent by the law firm has stated. Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008. The apex court had in 2018 put on hold the sale of Fortis Healthcare to IHH on a contempt plea filed by the Japanese drugmaker against the Singh brothers.