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by Joie Freel - Saturday, 19 August 2023, 8:48 PM
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Graphic: Global asset performance website

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Graphic: World FX rates website

By Herbert Lash and Elizabeth Howcroft

NEW YORK/LONDON, Jan 23 (Reuters) - Global equity markets edged higher on Monday as hopes of a less aggressive Federal Reserve buoyed investor manchester united drakt sentiment, while the euro hit a nine-month peak against the dollar on the rising likelihood of more jumbo interest rate hikes in Europe.

The start of another big week for U.S.

corporate earnings is expected to test a recent bounce in beaten-down technology and growth stocks as speculation grows that the Fed on Feb. 1 will only raise its key rate by 25 basis points.

European shares edged up 0.41% as declining natural gas prices have eased recession fears in the euro zone, despite expectations the European Central Bank will hike rates by 50 basis points on Feb.

2 and in March, a Reuters poll shows.

The euro shot to $1.0927 as it climbs from a two-decade low of $0.953 in September, but the single currency later pared gains against the dollar to $1.0867.

"The combination of a risk-off mood in the stock market and the divergence between the Fed and ECB allowed the euro to make new highs above 109," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

Gains in chipmakers boosted the technology sector, which has been hit by recession concerns amid high interest rates, leading Microsoft Corp, Amazon.com Inc and Alphabet Inc to lay off thousands of employees.

Investors are anxious to hear from corporate executives about their economic outlook in a week in which Microsoft posts results on Tuesday, Tesla Inc and IBM on Wednesday and Intel on Thursday.

Analysts expect year-over-year fourth-quarter earnings from S&P 500 companies to decline 2.9%, according to IBES Refinitiv data, compared with a 1.6% decline at the beginning of the year.

The Dow Jones Industrial Average rose 0.72%, the S&P 500 gained 0.99% and the Nasdaq Composite added 1.55%, pushing ahead from gains last Friday, its best session since late November.

Trading was thin in Asia, as markets in China, Hong Kong, Singapore, Malaysia, South Korea and Taiwan were closed for the Lunar New Year holiday.

MSCI's gauge of stocks across the globe gained 0.82%.

Money markets are pricing in a 97.8% chance that the Fed will raise rates by 25 basis points next month, and have lowered the likely peak rate to 4.906% in June, below Fed projections of its target rate staying above 5% into next year..

"The market´s still quite buoyant at the moment," said Peter Chatwell, head of global macro strategies trading at Mizuho, who said markets were being driven by the idea that U.S.

inflation has peaked.

Investors are waiting for euro zone and U.S. flash PMI data on Tuesday, which are expected to show less severe economic contractions than the previous month, according to analysts polled by Reuters. The data is forecast to show more improvement in Europe than in the United States.

Sterling traded at $1.2368, down 0.20%, while the Australian dollar, seen as a proxy for risk appetite, rose 0.56% to $0.7005.

The Japanese yen weakened 0.70% at 130.49 per dollar.

Treasury yields crept up to further erode a recent bond rally that some investors say was overdone in reflecting fears that the U.S. economy may soon enter a recession.

The yield on 10-year Treasury notes rose 2.4 basis points to 3.508%.

Euro zone bonds were little changed, with the benchmark 10-year German yield at 2.191%.

Crude prices rose to extend last week's gains on the back of a stronger outlook thanks to an expected economic recovery in top oil importer China this year.

U.S.

crude recently rose 0.34% to $81.92 per barrel and Brent was at $88.43, up 0.91% on the day.

(Reporting by Herbert Lash, additional reporting by Elizabeth Howcroft in London, Editing by Christina Fincher, Chizu Nomiyama and Sharon Singleton)

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