Global equities fall, dollar rises after strong U.S. data, rate hikes

By Chibuike Oguh

NEW YORK (Reuters) -Global equity markets fell while the U.S. dollar gained on Thursday following news of stronger-than-expected U.S. economic growth despite consecutive interest rate hikes from the Federal Reserve and European Central Bank.

U.S. gross domestic product (GDP) increased 2.4% in the second quarter, Commerce Department data on Thursday showed, beating estimates from economists polled by Reuters and dampening concerns of a recession due to the Fed's aggressive rate-tightening cycle. A Labor Department report also beat expectations as fewer people sought to claim unemployment benefits, indicating labor market resilience.

The Fed on Wednesday delivered its 11th consecutive rate hike, raising its benchmark policy rate by 25 basis points to a 5.25%-5.50% range.

The European Central Bank followed on Thursday with a 25 basis point hike, its ninth increase in a row, taking its main reference rate to 3.75% to contain high consumer prices.

"Because there's no risk in the market in the near term and everything looks so positive, everybody thinks this is going to be a soft landing and that's what is being priced in the market currently," said Aash Shah, senior portfolio manager at Summit Global Investments in Utah.

The MSCI world equity index, which tracks shares in nearly 50 countries, pulled back from a 15-month high and was down 0.27%.

On Wall Street, the Dow and benchmark S&P 500 reversed earlier gains and finished lower, snapping a 13-day winning streak, driven by losses in financials, healthcare, technology and consumer discretionary stocks.

The Dow Jones Industrial Average fell 0.67% to 35,282.72, the S&P 500 lost 0.64% to 4,537.46 and the Nasdaq Composite dropped 0.55% to 14,050.11.

European stocks added 1.35%, with Italian and Spanish shares hitting their highest levels since 2008 and 2020 respectively.

The dollar rose against a basket of its major peers after the rate hikes. The dollar index rose 0.682%, while the euro reversed gains to drop 1.05% to $1.0967 after ECB President Christine Lagarde told a press conference the central bank was determined to cool high consumer prices.

"We are not out of the woods yet. There's a lot of euphoria because everyone thinks we're not going to have a recession but lots of indicators still point towards a recession, including the yield curve," Shah added.

U.S. Treasury yields rose on the GDP data, to 4.010% for the benchmark 10-year note and 4.9368% for the two-year note.

Oil prices settled higher, supported by supply tightness following OPEC+ production cuts and renewed bullishness on the outlook for Chinese demand and global growth.

Brent crude settled up 1.6% to $84.35 a barrel while U.S. West Texas Intermediate (WTI) crude settled up 1.7% to $80.09.

Gold prices slipped more than 1% to a two-week low on a stronger dollar and uptick in bond yields. Spot gold dropped 1.4% to $1,943.89 an ounce, while U.S. gold futures fell 1.36% to $1,943.40 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by Richard Chang)