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Stocks rise as dollar falls, gold rallies on Fed commentary

Tan KW
Publish date: Wed, 29 Nov 2023, 10:10 AM
Tan KW
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NEW YORK/LONDON MSCI's global stock index advanced on Tuesday, while the dollar fell as a Federal Reserve (Fed) official signalled that the US central bank is done raising rates, and could even consider rate cuts if inflation keeps easing.

The US dollar index hit a 3½-month low, and was on track for its biggest monthly drop in a year, as investors took the view that growth in the world's largest economy is starting to slow down, with the market starting to price in a rate cut by the first half of the year.

Fed governor Christopher Waller bolstered these bets by flagging the possibility of lowering the Fed policy rate in the months ahead if inflation continues to come down. Waller also said he is "increasingly confident" the current interest rate setting would prove adequate to lower inflation to the Fed's 2% target.

Another Fed governor, Michelle Bowman, said the central bank will likely need to raise borrowing costs further in order to bring inflation back down to its target.

Traders appeared to take their cues from Waller, with increased bets for the first rate cut taking place as soon as March, with the probability for a 25-basis-point cut last at nearly 33%, up from 21.5% on Monday, according to the latest data from CME Group's Fedwatch tool. The majority expect a cut of at least one notch in May, according to CME data.

The market saw Waller's comments as the first sign the Fed "recognises they might be able to cut rates next year", while other officials "took some of the euphoria" away, according to Anthony Saglimbene, Ameriprise's chief market strategist.

And Saglimbene said, "It's normal you'll see stocks consolidate in the last few days of a really strong month. For the rest of the year, momentum is biased to the upside."

While trading in stocks was choppy, Wall Street indices managed to close higher. The Dow Jones Industrial Average rose 83.51 points, or 0.24%, to 35,416.98, the S&P 500 gained 4.46 points, or 0.10%, to 4,554.89, and the Nasdaq Composite added 40.73 points, or 0.29%, to 14,281.76.

MSCI's gauge of stocks across the globe gained 0.27%.

Also on Tuesday, a survey showed US consumer confidence rose in November after three months of declines, though households still anticipate a recession over the next year.

Later this week, the spotlight will be on the US October personal consumption expenditures report (PCE), which includes core PCE, which is the Fed's preferred measure of inflation. Eurozone consumer inflation figures should also give further clarity on where prices and monetary policy are headed there.

After the Fed commentary, US Treasury yields dipped with benchmark 10-year notes down six basis points to 4.328%, from 4.388% late on Monday.

In currencies, the dollar index fell 0.368%, with the euro up 0.32% to US$1.0988.

The Japanese yen strengthened 0.82% versus the greenback at 147.47 per dollar, while sterling was last trading at US$1.2694, up 0.55% on the day.

With some encouragement from the weaker dollar, spot gold prices were up 1.4% at US$2,040.79 an ounce after hitting their highest level since May in their fourth consecutive gain.

Oil prices settled higher on Tuesday on the possibility that the Organization of the Petroleum Exporting Countries and its allies (Opec+) will extend or deepen supply cuts, a storm-related drop in Kazakh oil output, and the weaker US dollar.

US crude settled up 2.07% at US$76.41 per barrel, while Brent settled at US$81.68, up 2.13% on the day.

 


  - Reuters

 

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