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Equities gain while Treasury yields fall on data, talk of Fed rate cuts

Tan KW
Publish date: Thu, 30 Nov 2023, 08:04 AM
Tan KW
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NEW YORK/LONDON MSCI's global equities index crept higher on Wednesday while Treasury yields fell as third-quarter data provided encouraging signs for the economy even as U.S. Federal Reserve officials provided mixed messages on monetary policy.

Commerce Department data showed U.S. gross domestic product(GDP) rose at a 5.2% annualized rate last quarter, revised up from the previously reported 4.9% pace and marking the fastest pace of expansion since the fourth quarter of 2021.

The GDP report also confirmed inflation was trending lower, with slight downward revisions to measures watched by the Fed for monetary policy, suggesting a so-called Goldilocks scenario to Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.

"The improving data is earning the possibility of some recalibration of policy next year. That's what the market is pricing in. If the data continues on this path it will earn modest rate cuts next year. That's helping to ignite risk appetites," said Melson.

While the tone from Federal Reserve officials' comments on Wednesday was mixed, investors still focused on comments made on Tuesday by Fed Governor Christopher Waller - an influential and previously hawkish voice at the U.S. central bank. Waller had said rate cuts could begin in months if inflation keeps easing.

On Wednesday the Fed's Bank of Atlanta President Raphael Bostic said he expects U.S. growth to slow and inflation to continue to ease on the back of tight monetary policy.

But in contrast, Richmond Federal Reserve Bank President Thomas Barkin on Wednesday said he is "skeptical" that inflation is on its way down to 2%, and wants the option of another rate hike in case inflation gains steam.

On Wall Street, the Dow Jones Industrial Average rose 68.11 points, or 0.19%, to 35,485.09, the S&P 500 gained 4.05 points, or 0.09%, to 4,558.94 and the Nasdaq Composite added 6.86 points, or 0.05%, to 14,288.62.

The pan-European STOXX 600 index rose 0.45% and MSCI's gauge of stocks across the globe gained 0.14%.

In U.S. Treasuries, yields were lower with the benchmark 10-year note on track for a third straight session of declines, as the economic data failed to derail expectations that a Fed rate cut could be on the horizon.

Benchmark 10-year notes were down 5.8 basis points to 4.278%, from 4.336% late on Tuesday. The 30-year bond was last down 6.2 basis points to yield 4.4619%, from 4.524%. The 2-year note was last was down 8.9 basis points to yield 4.6475%, from 4.736%.

The dollar index, which measures the greenback against other major currencies, climbed from its lowest level in more than three months as investors consolidated positions after four days of losses, with support from U.S. economic data.

The dollar index rose 0.175%, with the euro down 0.13% to $1.0976. The Japanese yen strengthened 0.15% versus the greenback at 147.27 per dollar, while Sterling was last trading at $1.27, up 0.06% on the day.

Oil prices roseas investors looked past a jump in U.S. crude, gasoline and distillate stockpiles but focused on an upcoming meeting of OPEC+, the Organization of the Petroleum Exporting Countries and allies such as Russia.

Prices were lifted by a Wall Street Journal report that the group was considering new oil production cuts of as much as 1 million barrels a day, traders said.

U.S. crude settled up 1.9% at $77.86 per barrel and Brent finished at $83.10, up 1.74% on the day.

Elsewhere, spot gold shot to a roughly seven-month high of $2,051 an ounce and was last up 0.3% to $2,046.13 an ounce. U.S. gold futures gained 0.33% to $2,046.70 an ounce.


  - Reuters


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