Stocks boosted by rate hike prospects; Dollar Slip: Markets Wrap

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

Most read from Bloomberg

The Stoxx Europe 600 index extended its recent rally as the property sector outperformed, boosted by the prospect of slower interest rate hikes and analyst upgrades. Dr. Martens Plc shares dipped the most after the bootmaker’s sales and earnings missed expectations. An index of global shares rose for a third day.

Trading volume is lower due to the Thanksgiving holiday, with no cash trading in the US stock market. Wall Street futures rose after the S&P 500 closed at a two-month high on Wednesday. Asia’s stock benchmark rose.

Minutes from the Fed meeting earlier this month indicated that several officials supported the need to moderate the pace of rate hikes, although some emphasized the case for a higher terminal rate. This adds weight to expectations that the central bank will raise interest rates by 50 basis points next month, ending a streak of 75 basis point hikes.

“It was the start of a more different and dovish narrative from the Fed,” said Sunaina Sinha Haldea, global head of private equity advisory at Raymond James. “Is it a turning point? No, but do we see a slowdown in rate hikes and that downward path toward rate cuts coming? Yes. I think we’ll look back and say this was the peak of it.

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

A gauge of the dollar’s strength fell further on Thursday, entering a third day of declines. European bonds rose as traders trimmed bets on rate hikes by the European Central Bank, with risk-sensitive Italian debt leading the gains. There is no trading in government bonds due to the US holiday.

“A few” ECB officials favored a smaller rate hike in October to tackle record inflation, a report from their last meeting showed. Those favoring a less aggressive move cited the fact that the hike was accompanied by other monetary policy tightening, according to the account released Thursday.

Oil fell as the European Union considered a higher-than-expected price cap on Russian crude and signs of a global slowdown rose.

Meanwhile, Bank of America Corp. said its private clients are flocking to bonds and out of stocks amid fears of a looming recession. Bond funds drew inflows for a 39th straight week, strategists led by Michael Hartnett wrote in a note. The strategists prefer to hold bonds in the first half of 2023, with equities becoming more attractive in the last six months of next year.

“We remain bearish risk assets in the first half, poised to turn bullish in the second half as the narrative shifts from inflation and interest rate ‘shocks’ in 2022 to recession and credit ‘shocks’ in the first half of 2023,” wrote the strategists.

Gold rose for a third day on the Fed minutes. The precious metal has been hurt by the U.S. Federal Reserve’s aggressive monetary tightening to curb inflation, which has pushed up bond yields and the dollar and sent bullion back about 16% from its peak in March.

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

Key events this week:

  • The ECB publishes a report on its October policy meeting on Thursday

  • The US stock and bond markets are closed on Thanksgiving Day, Thursday

  • The US stock and bond markets close early on Friday

Some of the most important movements in markets:

Equities

  • S&P 500 futures rose 0.3%, climbing for a third straight day, the longest winning streak since Nov. 8 at 14:33 New York time

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

  • The MSCI World Index rose 0.4%, rising for a third day in a row, its longest winning streak since Nov. 8

Currencies

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

  • The euro was little changed at $1.0405

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

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

Cryptocurrencies

  • Bitcoin rose 0.6% to $16,566.67

  • Ether rose 2.9% to $1,203.05

Bonds

Raw materials

  • West Texas Intermediate crude was little changed

  • Gold futures rose 0.5%, more than any last gain since November 11

This story was produced with assistance from Bloomberg Automation.

–With assistance from Allegra Catelli.

Most read from Bloomberg Businessweek

©2022 Bloomberg LP

Add a Comment

Your email address will not be published. Required fields are marked *