Stocks Rise, Dollar Falls as Turnaround Signs Grow: Markets Wrap

(Bloomberg) — The dollar weakened and stocks rose in Asia on increasing speculation that the Federal Reserve is nearing the end of its tightening cycle.

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The U.S. currency weakened against all of its Group of 10 currencies after dovish comments from Federal Reserve officials last week bolstered bets that the central bank is done raising interest rates. An index of emerging market currencies climbed to a nine-month high, while an index of Asian stocks headed for its highest close in two months.

Several European Central Bank officials will speak on Monday and may provide insight into their own rate hike cycle.

Traders are currently pricing in about a 30 percent chance of a first Fed rate cut in March after Vice Chairman Michael Barr said Friday that officials were likely at or near the end of their tightening campaign. Still, San Francisco Fed President Mary Daly said policymakers weren’t sure whether inflation was on track to meet its 2 percent target.

“The Fed’s dovish narrative remains in place,” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. “There is likely to be continued downward pressure on U.S. yields and the dollar.”

Still, “Does a month of reasonably favorable inflation data really justify such a massive rate hike?” We don’t think so, and yet here we are. We must respect this move, even though we completely disagree with it,” he wrote in a research note.

Treasury sale

Treasury bonds in Asia fell slightly ahead of the 20-year auction in the U.S., which will help gauge whether investors are confident the selloff is over once and for all in 2023. The Treasury market is expected to post a monthly profit in November, ending a six-month losing streak. Australian and New Zealand bonds also fell.

The story goes on

European stock futures were little changed on Monday and their U.S. contracts were lower after the S&P 500 climbed above 4,500 on Friday, capping its third straight weekly gain.

Yuan rallies

The offshore yuan rose after the People’s Bank of China raised its daily reference rate for the currency to its highest level since August. The country’s commercial lenders left their key interest rates unchanged on Monday, in line with the central bank’s decision this month to maintain key rates in favor of other means of supporting stimulus spending.

“The yuan has probably passed the turning point against the dollar, as have most developed markets and Asian peers,” said Fiona Lim, a senior foreign exchange analyst at Malayan Banking Bhd. in Singapore.

Japan’s Nikkei 225 stock average briefly surpassed its June intraday peak to reach its highest level since 1990, extending its gains this year to about 28%. The index was boosted by recent weakness in the yen, solid corporate earnings and corporate governance reforms.

Oil prices rose as investors awaited an OPEC+ supply meeting that will shape market balances through 2024.

Investors are also paying attention to any impact of OpenAI’s deepening downturn. Mira Murati, OpenAI’s interim chief executive, was reportedly planning to rehire her ousted predecessor Sam Altman, but at the same time the company’s board decided to hire former Twitch boss Emmett Shear as CEO.

In Argentina, Libertarian candidate Javier Milei defeated Economy Minister Sergio Massa to win Sunday’s presidential runoff. Due to a public holiday, there was no immediate market reaction.

Chinese smartphone giant Xiaomi Corp. will report its results on Monday, while Nvidia Corp. published its results on Tuesday. Trading is likely to become more subdued towards the end of the week due to the US Thanksgiving holiday on Thursday.

Important events this week:

  • European Central Bank Council members Pablo Hernandez de Cos, Francois Villeroy de Galhau and Boris Vujcic will speak at various events on Monday

  • Bank of England Governor Andrew Bailey speaks on Monday

  • Leading index of the US Conference Board, Monday

  • European Central Bank President Christine Lagarde speaks on Tuesday

  • Canada CPI, Tuesday

  • Minutes of the Federal Reserve’s November monetary policy meeting, Tuesday

  • Nvidia results, Tuesday

  • Eurozone consumer confidence, Wednesday

  • Initial U.S. jobless claims, University of Michigan consumer sentiment, durable goods, Wednesday

  • Eurozone PMIs, Thursday

  • UK S&P Global/CIPS Manufacturing PMI, Thursday

  • The European Central Bank will publish a report on its October monetary policy meeting on Thursday

  • Thanksgiving holiday in the USA, Thursday

  • Japanese CPI, Friday

  • Germany’s GDP, Friday

  • US manufacturing purchasing managers index, Friday

  • Black Friday sales start on Friday

Some of the key moves in the markets:

Shares

  • S&P 500 futures fell 0.2% at 6:28 a.m. London time. The S&P 500 rose 0.1% on Friday

  • Nasdaq 100 futures fell 0.3%. The Nasdaq 100 has barely changed

  • Euro Stoxx 50 futures remained unchanged

  • Japan’s Topix index fell 0.8%

  • Hong Kong’s Hang Seng Index rose 1.5%

  • China’s Shanghai Composite Index rose 0.4%

  • Australia’s S&P/ASX 200 index rose 0.1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro was little changed at $1.0917

  • The Japanese yen rose 0.3% to 149.17 per dollar

  • The offshore yuan rose 0.4% to 7.1866 per dollar

  • The Australian dollar rose 0.5% to $0.6548

  • The British pound rose 0.1% to $1.2478

Cryptocurrencies

  • Bitcoin rose 0.3% to $37,133.38

  • Ether rose 0.9% to $2,001.8

Tie up

  • The 10-year Treasury yield rose two basis points to 4.45%

  • The 10-year Japanese government bond yield fell one basis point to 0.740%

  • Australia’s 10-year yield rose four basis points to 4.51%

raw materials

This story was produced with support from Bloomberg Automation.

– With assistance from Matthew Burgess and Qizi Sun.

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