(Bloomberg) — European stocks rose and the dollar fell after minutes from the Federal Reserve meeting showed support for more moderate rate hikes.
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The Stoxx Europe 600 Index extended its recent rally as the real estate sector outperformed, boosted by prospects of slower rate hikes and higher analysts. The shares of Dr. Martens Plc fell the most ever after the shoemaker’s sales and profits beat expectations.
Trading volumes are expected to be lower due to the Thanksgiving holiday, meaning 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 meeting earlier this month showed that several officials supported the need to moderate the pace of rate hikes, even as some underlined the need for higher final interest rates. This adds weight to expectations that the central bank will raise interest rates by 50 basis points next month, ending a series of jumbo 75 basis point hikes.
“It was the beginning of a more different and mellower story from the Fed,” said Sunaina Sinha Haldea, global head of Private Capital Advisory at Raymond James. “Is it a pivot? No, but do we see a slowdown in rate hikes and that downward path towards rate cuts coming through? Yes. I think we can look back and say it was the pinnacle.”
Data from Wednesday also showed that US business activity slowed and jobless claims rose as the economy cooled.
A gauge of dollar strength fell further on Thursday, extending the decline for a third day. Due to the holiday in the US, there is no trading in government bonds.
Oil fell as the European Union considered a higher-than-expected Russian crude price cap and signs of a global slowdown increased.
Meanwhile, Bank of America Corp. that its retail clients are flocking to bonds and out of equities for fear of an imminent recession. Bond funds saw inflows for the 39th straight week, strategists led by Michael Hartnett wrote in a note. The 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, and will turn bullish in the second half as the narrative shifts from inflation and rate shocks of 2022 to recession and credit shocks in the first half of 2023,” the strategists wrote.
Gold rose for a third day on the Fed minutes. The precious metal has suffered from the US Federal Reserve’s aggressive monetary tightening policy to curb inflation, which has pushed up bond yields and the dollar and in turn has sent the precious metal down about 16% from its peak in March.
In Asian trading, mainland Chinese equities 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 reserves to boost growth.
Main events this week:
The ECB will publish the report of its policy meeting in October on Thursday
The US stock and bond markets are closed for Thanksgiving, Thursday
US stock and bond markets close early Friday
Some of the major moves in markets:
The Stoxx Europe 600 was up 0.5% from 10:34am London time
Futures on the Nasdaq 100 rose 0.5%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index rose 1.6%
The MSCI Emerging Markets Index rose 1.2%
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0398
The Japanese yen rose 0.9% to 138.34 per dollar
The offshore yuan changed little at 7.1535 to the dollar
The British pound rose 0.4% to $1.2098
Bitcoin rose 0.4% to $16,538.61
Ether rose 2.3% to $1,195.72
The yield on 10-year government bonds was little changed at 3.69%
German 10-year yields fell 10 basis points to 1.83%
UK 10-year yields fell by nine basis points to 2.92%
Brent oil rose 0.1% to $85.51 a barrel
Spot gold rose 0.3% to $1,755.20 an ounce
This story was created with the help of Bloomberg Automation.
–With help from Allegra Catelli and Richard Henderson.
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