Global stocks headed for a sixth straight session of gains on Monday, helped by last week’s rally in bonds as markets expect more interest rate cuts in the US and Europe – bets that will be tested this week, Reuters reported and adds:
“Bond markets rebounded as a favorable U.S. payrolls report and upbeat productivity data showed the labor market was cooling enough to avoid the need for further rate hikes by the Federal Reserve” .
Futures markets are moving, suggesting a 90% chance the Fed is done raising rates and an 86% chance the first policy easing will happen as early as June.
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They also suggest about an 80% chance that the European Central Bank will cut interest rates by April, while the Bank of England will cut rates in August.
The benchmark 10-year U.S. yield fell about 29 basis points last week, its biggest weekly decline since March. Bond yields move inversely with their prices.
On Monday, the rally stalled, with the 10-year bond yield rising about 3 basis points to 4.587%, well below a peak of more than 5% reached in mid-October, the news agency said, citing Sami Chaar. chief economist at Lombard Odier:
“We would like to add a note of caution – yes, we are in the camp that says the inflation outlook will allow for rate cuts next year, but a move to more and more recent cuts seems overly optimistic to us. We have already seen the policy to swing like a pendulum back and forth and I think that’s going to be the story for the next few quarters.”
If there are any moves that are out of the ordinary for the current trend, it comes from the Reserve Bank of Australia, which is seen as likely to resume raising interest rates on Tuesday as the country’s inflation remains stubbornly high.
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The Bank of Japan is also on the way to tightening interest rates, albeit at a very slow pace. On Monday, its head said the institution was closer to meeting its inflation target, but that was still not enough to end ultra-loose policy.
Hopes of lower borrowing costs continue to help stocks, especially those in Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.0% on Monday, which also lifted MSCI’s world index by 0.38%, a sixth straight session of gains.
Last week, the world index recorded its biggest weekly growth in a year. European shares opened in positive territory on Monday, swinging in both directions after experiencing their best week since March.
South Korean shares stood out, rising 4.3% as the country’s authorities reimposed a ban on short selling until mid-2024.
S&P 500 and Nasdaq futures rose 0.1%.
Business activity in the eurozone is sinkingThe bloc’s PMI hit its lowest level since November 2020
Falling dollar
The yield on two-year Treasuries settled at 4.875% and the yield on 10-year Eurozone bonds rose to 2.69%, after seven sessions of declines.
A retreat in Treasury yields pulled the rug out from under the greenback, with the dollar index down 0.14% to 104.91, its lowest since late September, after retreating 1.3% last week , the news agency also writes.
The euro was up 0.17% at $1.0747 after rising 1% to its highest in nearly two months on Friday. The dollar has even lost ground against the struggling yen in recent sessions and is at 149.57 yen, far from its recent peak of 151.74.
A weaker dollar and yields helped gold reach $1,985, close to a recent five-month high of $2,009.
Higher for longer: Inflation keeps interest rates at the ceilingMore rate hikes are possible if new shocks emerge
Oil prices rose after losing 6% last week, boosted by confirmation from Saudi Arabia and Russia that they would continue further voluntary oil output cuts.
In the Middle East on Sunday, Israel rejected growing calls for a ceasefire in Gaza, and military experts said the army would step up operations against the Palestinian Islamist group Hamas.
Brent added 1.5% to $86.31 a barrel, while U.S. crude rose by a similar amount to $81.75 a barrel.
