World stocks are at their highest level in 5 weeks, and earnings are in the spotlight.

Wednesday was the first day in five weeks that world stocks reached a new high. This was due to growing hopes that the U.S. could soon slow down its rate hikes.

After Google’s parent company, Alphabet (NASDAQ:GOOGL), reported weaker-than-expected ad sales after Tuesday’s close and Microsoft (NASDAQ:MSFT) missed expected revenue forecasts, Wall Street stock futures fell, pointing to a weak opening later.

Related: As the mood gets worse, world stocks fall back to levels not seen in two years. 

But after a weak start, European stocks went up because bank earnings were better than expected. Deutsche Bank’s (ETR:DBKGn) profit for the third quarter went up more than expected, and Barclays (LON:BARC), a British bank, also did better than expected because of a trading boom.

MSCI’s World Stock Index hit its best level in five weeks, and Asian stocks went up.

Most people expect the U.S. Federal Reserve to raise interest rates by another 75 basis points at its November meeting. However, the idea that the central bank might then start to slow down its aggressive tightening cycle has boosted the mood on world stock markets and softened a dollar rally.

“The MSCI world equity index is now almost 10% above its lows,” said Chris Turner, global head of markets at ING. “This rise has been helped by some stability in Europe and probably by the fact that investors have a lot of cash on hand and don’t own enough stocks.”

“It does feel like it’s too soon to say ‘all clear’ for stock markets. For example, the Fed could easily push U.S. real rates deeper into restrictive territory. This dollar drop, then, is being seen as a corrective.

The euro went back above $1 for the first time in five weeks, and the dollar index, which shows how much the dollar is worth compared to a basket of other major currencies, fell to its lowest level in three weeks.

Most people think that the Bank of Canada will raise rates by another 75 bps later in the day to keep inflation from staying too high.

FED TURN?

In Asia, MSCI’s broadest index of Asia-Pacific shares outside of Japan went up by more than 1%, while Japan’s Nikkei went up by 0.7% and hit its highest level since September 20.

After a sharp drop on Monday, Chinese stocks made up some of their losses. The drop was caused by worries that President Xi Jinping’s new leadership team, which was announced on Sunday, will put the state ahead of the private sector and keep tough zero-COVID policies in place, possibly until next year.

According to Shane Oliver, head of investment strategy and chief economist at AMP (OTC: AMLTF) Capital, the Asian rally was aided by expectations that the Fed would slow down rate hikes following another big one next week.

“Central banks are going to raise interest rates, and there is still a chance of a recession.”

The global economy is getting close to a recession, and a poll by Reuters showed that economists have again cut their growth predictions for key economies.

On Tuesday, data from the U.S. showed that the growth of home prices was slowing and that consumer confidence was falling. There were also some signs that the Fed’s aggressive rate hikes were starting to cool the job market.

The price of Treasuries has gone up, and the yield on the benchmark 10-year U.S. government debt was last at around 4.03%, which was down 7 basis points. [US/]

Australia’s inflation jumped to its highest level in 32 years last quarter, as the cost of building homes and gas went up. The surprise put more pressure on the central bank to reverse its recent turn toward easing, but the markets don’t think there will be a big change.

The Australian dollar went up by more than 1%.

At around $1.1579, sterling hit its highest level since mid-September, thanks to hopes that new Prime Minister Rishi Sunak will be able to bring peace back to the country after weeks of chaos.

China’s yuan also got stronger against the dollar. This happened after big state-owned banks were seen selling dollars to calm the market the day before.

Related: World stocks anticipate their first weekly gain in eight weeks, while the dollar hits a one-month low.

In other places, oil prices went down because industry data showed that the U.S. had more crude oil on hand than expected. The price of a barrel of Brent crude for December fell by 58 cents, or 0.7%, to $92.90. [O/R]