Global shares rise ahead of Fed minutes, while UK inflation lifts the pound

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The British pound rose against the dollar as investors anticipate aggressive rate hikes over stunning UK headline inflation numbers.(Photo by ANGELA WEISS/AFP via Getty Images)
  • Global shares advanced on Wednesday as investors braced for the minutes from the Fed's July meeting.

  • Over in the UK, the pound was up against the dollar after headline inflation flew past 10%.

  • Oil prices bounced back from a recent drop as talks over Iran's nuclear deal stalled.

Global shares rose on Wednesday ahead of the minutes from the Federal Reserve meeting where investors will closely watch for any hints on further rate hikes as inflation still grips the US economy.

The MSCI World Index gained 0.04% while futures across Wall Street's main benchmarks were in the red.

The S&P 500 and Dow futures futures lost 0.35% and 0.23%, respectively, while those on the Nasdaq 100 were down the most comparatively, falling 0.46%.

The decline suggested a slight reversal in the US benchmarks after gains the previous session following strong earnings releases from Walmart and Home Depot.

Investor focus will be on the Fed minutes as well as US retail sales, which have been positive every single month this year apart from a slight drop in May. Consumer spending is a cornerstone of the economy and high inflation is starting to weigh on US households.

"Market today will eye the latest US retail sales report from July, which saw peak gasoline prices in the US mid-month, while the FOMC Minutes may prove a bit stale, given they were created before three weeks of the market rallying sharply and financial conditions easing aggressively, likely not the Fed's intention," Saxo Bank analysts said.

Over in Europe, the British pound was up 0.14% against the dollar after UK inflation hit its highest in decades above market expectations of 9.8%, increasing to 10.1% through July. With the Bank of England forecasting inflation will peak above 13%, interest rates are likely to rise more quickly, prompting investors to scoop up the pound in anticipation of higher returns compared to other currencies.

"The Bank of England is surprisingly clear that two years of negative growth does not prevent the bank from continuing with a number of hikes in the future," SEB Group said.

In oil markets, Brent crude, the global benchmark, bounced from a recent slump rising 0.24% to trade at $92.53 a barrel, but still remains at its lowest in nearly six months, before Russia invaded Ukraine. US West Texas Intermediate also gained, rising 0.28% to trade at $86.77. Data on Tuesday showed a surprisingly large drawdown in commercial fuel inventories, suggesting demand remains resilient.

Discussions over Iranian oil possibly entering the market is raising prospects of a supply increase. Western powers are in talks with Tehran over the country's nuclear activities. The US walked away from an international accord in 2017 and imposed a ban on Iranian oil exports. A breakthrough could lead to a resumption in Iranian shipments and an increase in production. Under normal circumstances, Iran is OPEC's third-largest producer behind Saudi Arabia and Iraq, with output capacity of close to 4 million barrels per day.

In Asia, stocks picked up, with Tokyo's Nikkei 225, Hong Kong's Hang Seng and China's CSI 300 rising 1.23%, 0.46% and 0.94%, respectively, after a drop in stocks earlier this week after weak Chinese economic data.

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