Stocks boosted by rate hike prospects; Dollar Slips: Markets Conclude

(Bloomberg) – European stocks gained and the dollar fell after Federal Reserve meeting minutes showed support for more moderate interest rate hikes.

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The Stoxx Europe 600 index extended its recent rally as the housing sector outperformed, buoyed by prospects for slower rate hikes and analyst updates. Dr. Martens Plc shares plunged the hardest ever after the shoemaker’s sales and earnings fell short of expectations. An index of global stocks advanced for a third day.

Trading volumes are lower due to the Thanksgiving holiday with no cash trades on the US stock market. Wall Street futures moved higher after the S&P 500 closed at a two-month high on Wednesday. The Asian stock benchmark rose.

Fed meeting minutes earlier this month indicated that several officials supported the need to moderate the pace of rate hikes, although some stressed the need for a higher terminal rate. This adds weight to expectations that the central bank will raise rates by 50 basis points next month, ending a series of huge 75 basis points hikes.

“It was the beginning of a more diverse and dovish narrative from the Fed,” said Sunaina Sinha Haldea, global head of private capital advisory at Raymond James. “Is he a pivot? No, but are we seeing a slowdown in rate hikes and a downward path to incoming rate cuts? Yes. I think we’ll look back and say this was the high point.

Wednesday’s data also showed that business activity in the US contracted and jobless claims rose as the economy cooled.

An indicator of dollar strength fell further on Thursday, pushing the decline into a third day. European bonds rose as traders trimmed bets on rate hikes by the European Central Bank, with risk-sensitive Italian debt driving gains. There is no Treasury trading due to US holidays.

“Few” ECB officials favored a minor interest rate hike in October to tackle record inflation, a report from their latest meeting showed. Those who favored a less aggressive pace cited that the hike was accompanied by other monetary tightening measures, according to the report, released on Thursday.

Oil fell as the European Union considered a higher than expected price high for Russian crude and signs of a global slowdown increased.

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

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

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

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

Key events this week:

  • The ECB publishes the minutes of its October policy meeting on Thursday

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

  • US stock and bond markets close early on Friday

Some of the major moves in the markets:

Actions

  • S&P 500 futures rose 0.3%, climbing for the third consecutive day, the longest streak since Nov. 19. 8:00am or 2:33pm New York time

  • Dow Jones Industrial Average futures rose 0.2%, climbing for the third consecutive day, the longest streak since Nov. 19. 8

  • The MSCI World index rose 0.4%, climbing for the third consecutive day, the longest streak since November 19. 8

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%, down for the third consecutive day, the longest streak of losses since Nov. 19. 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 climbed 0.6% to $16,566.67

  • Ether rose 2.9% to $1,203.05

obligations

goods

  • West Texas Intermediate crude had changed little

  • Gold futures rose 0.5%, more than any closing gain since Nov. 19. 11

This story was produced with assistance from Bloomberg Automation.

–With the assistance of Allegra Catelli.

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