Equities boosted by rate hike outlook;  Dollar Slips: Market Recap

Equities boosted by rate hike outlook; Dollar Slips: Market Recap

(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 real estate sector outperformed, boosted by the prospect of slower rate hikes and analyst upgrades. Shares of Dr. Martens Plc fell the most on record after the bootmaker’s sales and earnings missed expectations. A global equity index advanced for a third day.

Trading volumes are 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. The Asian equity benchmark rose.

Minutes from the Fed’s meeting earlier this month indicated that several officials supported the need to moderate the pace of rate hikes, although some pointed to the merits of 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 massive 75 basis point hikes.

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

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

A gauge of dollar strength fell further on Thursday, driving declines into a third day. European bonds rallied as traders cut bets on rate hikes by the European Central Bank, with risk-sensitive Italian debt leading the gains. There is no treasury bill trading due to the US holiday.

“A few” ECB officials have come out in favor of lower interest rate hikes in October to tackle record inflation, a report from their last meeting showed. Those who favored a less aggressive measure cited the fact that the hike was accompanied by other monetary tightening measures, according to the minutes released Thursday.

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

Meanwhile, Bank of America Corp. said its retail clients were flocking to bonds and stocks amid fears of a looming recession. Bond funds drew inflows for a 39th consecutive week, the strategists led by Michael Hartnett wrote in a note. Strategists favor holding 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, which should turn bullish in the second half as the narrative shifts from the inflation and rate shocks of 2022 to the recession and credit “shocks” in the first half of 2023. “, wrote the strategists.

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

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 released on Wednesday said the People’s Bank of China would allow banks to reduce their capital reserves to stimulate growth.

Key events this week:

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

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

  • U.S. stock and bond markets close early on Friday

Some of the major movements in the markets:


  • S&P 500 futures rose 0.3%, climbing for the third straight day, the longest winning streak since Nov. 8 at 2:33 p.m. New York time.

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

  • The MSCI World Index rose 0.4%, climbing for the third straight day, the longest winning streak since Nov. 8.


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

  • The euro was little changed at $1.0405

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

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


  • Bitcoin rose 0.6% to $16,566.67

  • Ether rose 2.9% to $1,203.05



  • West Texas Intermediate Crude 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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