Stocks Raised on Interest Rate Rise Outlook; Dollar Slips: Markets Wrap


(Bloomberg) — European stocks rose and the dollar fell after Federal Reserve meeting minutes showed support for more modest rate hikes.

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The Stoxx Europe 600 Index extended its recent rally as the real estate sector improved on the outlook for slower interest rate growth and analyst upgrades. Dr. Martens Plc shares hit record highs after the bootmaker’s sales and earnings missed expectations. The global stock index advanced for the third day.

Without cash US stock market trading, trading volumes are low due to the Thanksgiving holiday. Wall Street futures rose after the S&P 500 closed at a two-month high Wednesday. Asian stock index rose.

Minutes from the Fed’s meeting earlier this month showed that while some officials emphasized the case for a higher terminal rate, few officials supported the need to ease the pace of rate hikes. That ends a jumbo 75 basis point hike, adding weight to expectations that the central bank will raise interest rates by 50 basis points next month.

“It was the start of a different and more dovish story from the Fed,” said Sunaina Sinha Haldea, global head of private equity advisory at Raymond James. “Is this a loop? No, but are we seeing a slowdown in interest rate hikes and is it headed for rate cuts? Yes. I think we will look back and say that this was his peak.”

Data on Wednesday also showed U.S. business activity slowed and jobless claims rose as the economy cooled.

A gauge of the dollar’s strength fell further on Thursday, falling for a third straight day. European bonds rose, with risk-sensitive Italian debt leading gains as traders trimmed bets on European Central Bank rate hikes. Treasuries are closed due to the US holiday.

“Several” ECB officials favored a smaller increase in interest rates in October to tackle record inflation, an account of their latest meeting showed. Those favoring a less aggressive move indicated the increase would be accompanied by other monetary tightening measures, according to the report published Thursday.

Oil fell as the European Union set a higher-than-expected price ceiling for Russian crude and growing signs of a global slowdown.

Meanwhile, Bank of America Corp said its private clients were flocking to bonds and losing stocks amid fears of a looming recession. Bond funds led inflows for the 39th straight week, strategists led by Michael Hartnett said in a note. Strategists favor holding bonds in the first half of 2023, with stocks becoming more attractive in the last six months of next year.

“We remain low-risk assets in the first half, with a bullish outlook in the second half as the transition from the inflation and rate ‘shocks’ of 2022 to recessionary and credit ‘shocks’ takes place,” the strategists wrote.

Gold rose for the third day in Fed minutes. The precious metal was hurt by the US central bank’s aggressive monetary tightening to curb inflation, which boosted bond yields and the dollar, sending bullion down about 16% from its March peak.

In Asian trade, mainland Chinese stocks underperformed as investors weighed the impact of record Covid-19 cases against signs of easing monetary conditions. Official comments released on Wednesday indicated that the People’s Bank of China will allow banks to reduce capital reserves to stimulate growth.

This week’s highlights:

  • The ECB publishes an account of its Thursday, October policy meeting

  • US stock and bond markets are closed on Thursday for Thanksgiving

  • US stock and bond markets close early on Friday

Some of the major movements in the markets are:

Shares

  • S&P 500 futures climbed 0.3%, climbing for a third day in a row, their longest winning streak since Nov. 8 at 2:33 p.m. New York time.

  • Dow Jones Industrial Average futures rose 0.2%, climbing for a third straight day, their longest winning streak since Nov. 8.

  • The MSCI World index rose 0.4% for a third straight day, its longest winning streak since Nov. 8.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2% for a third straight day, its longest losing streak since Nov. 8.

  • The euro was little changed at $1.0405

  • The British pound rose 0.5% to its highest level since August 12

  • The Japanese yen rose 0.8% to its highest level since August 26

Cryptocurrencies

  • Bitcoin rose 0.6% to $16,566.67

  • Ether rose 2.9% to $1,203.05

Bonds

Commodity

  • West Texas Intermediate crude oil was little changed

  • Gold futures rose 0.5%, more than any closing gain since Nov. 11

This story was produced with assistance from Bloomberg Automation.

–With help from Allegra Catelli.

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