Global shares rise with dollar, US bond yields turn higher

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 10, 2024. REUTERS/Brendan McDermid/File Photo
NEW YORK LONDON :MSCI's global equities index rose on Friday while U.S. Treasury yields turned higher with the dollar as upbeat economic data and earnings appeared to help investors shrug off any jitters ahead of the U.S. presidential inauguration.
The U.S. dollar strengthened against major peers after four days of declines, while benchmark U.S. Treasury yields - after a three-session drop - hit a two-week low before reversing course.
Federal Reserve data on Friday showed U.S. manufacturing output increased 0.6 per cent last month after an upwardly revised 0.4 per cent rebound in November, likely as production picked up after a factory worker strike ended.
Elsewhere, data showed U.S. single-family homebuilding increasing to a 10-month high in December, indicating that construction activity regained some momentum at the end of the year, though rising mortgage rates and a glut of new homes on the market could constrain recovery.
All three of Wall Street's major indexes were up for the day while the S&P 500 and the Dow registered their biggest weekly gains since the week of the U.S. presidential election. The Nasdaq scored its biggest weekly advance since early December.
"There's an expectation that the economy is not as weak and inflation is not as big a problem as investors may have thought," said Phil Orlando, chief equity strategist at Federated Hermes, pointing to the production and housing data as well as inflation data released earlier this week.
"Given the over-sold nature of the market, we've enjoyed a nice bounce here," he said.
On Wednesday, softer than forecast core inflation data had pushed down the U.S. 10-year yield and supported stocks. Adding more encouragement to stocks this week were comments from Fed Governor Christopher Waller on Thursday signaling that three or four rate cuts are still possible in 2025 if data is weaker.
But Orlando was cautious about how well Friday's levels would hold after Monday's handover of the White House from Democratic President Joe Biden to Republican President-elect Donald Trump.
"You're going to be swapping very different fiscal policy approaches. I'm wondering if the market doesn't get spooked yet again, once Trump comes into office," said Orlando.
"We don't know what his talk is going to look like on Monday. We don't know what sort of day-one executive orders he's going to put through."
Anthony Saglimbene, chief market strategist at Ameriprise, said that along with economic data, strong bank earnings reports and outlooks had improved investor confidence since Monday.
But like Orlando, he was worried about post-inauguration volatility: "I wouldn't put a ton of faith in this holding until tariffs and immigration policy are clearer," said Saglimbene.
On Wall Street, the Dow Jones Industrial Average ended up 334.70 points, or 0.78 per cent, at 43,487.83 while the S&P 500 added 59.32 points, or 1 per cent, to 5,996.66 and the Nasdaq Composite finished up 291.91 points, or 1.51 per cent, at 19,630.20.
For the week, the Dow rose 3.69 per cent while the S&P 500 added 2.91 per cent and the Nasdaq climbed 2.45 per cent.
MSCI's gauge of stocks across the globe rose 6.60 points, or 0.78 per cent, to 855.23. Before its official close, the index was showing a weekly gain of about 2.5 per cent, which would be its biggest since November's election week.
Earlier, Europe's STOXX 600 index closed up 0.69 per cent on the day for a 1.7 per cent weekly gain, which was its strongest since the week starting Dec. 2.
In U.S. Treasuries, yields drifted higher in a choppy session, after the upbeat housing and industrial production data supported expectations that the Fed would slow the pace of rate cuts.
The yield on benchmark U.S. 10-year notes rose 1.5 basis points to 4.621 per cent, from 4.606 per cent late on Thursday while the 30-year bond yield rose to 4.8535 per cent from 4.845 per cent.
The two-year note yield, which typically moves in step with Fed interest-rate expectations, rose 4.5 basis points to 4.283 per cent, from 4.238 per cent late on Thursday.
In currencies, the dollar index rose on the day but showed a weekly decline after a six-week winning streak, as investors awaited the inauguration, with hopes for more clarity on policy.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,
rose 0.37 per cent to 109.37.
The euro was down 0.25 per cent at $1.0272 while against the Japanese yen, the dollar strengthened 0.69 per cent to 156.19.
But for the week, the yen was up as policymakers' comments spurred bets for a quarter-point Bank of Japan rate hike next week. Sources told Reuters the BOJ was likely to keep a hawkish policy pledge and raise rates next week.
Sterling weakened 0.6 per cent to $1.2166 after weaker than forecast British retail sales in December.
In commodities, oil prices closed lower on Friday but strengthened for a fourth-consecutive week, as the latest U.S. sanctions on Russian energy added to worries about oil supply disruptions.
U.S. crude settled down 1 per cent for the day at $77.88 a barrel. Brent settled at $80.79 per barrel, off 0.62 per cent.
Gold stocks in COMEX-approved warehouses have jumped by one-third in the past six weeks as market players sought deliveries to hedge against the possibility of import tariffs from the incoming U.S. president.
Gold prices fell on Friday but were on track for a weekly gain as uncertainties about Trump policies and bets on further interest rate cuts had lifted it above the key $2,700 level.
Spot gold fell 0.43 per cent to $2,702.06 an ounce. U.S. gold futures rose 0.19 per cent to $2,751.60 an ounce.