Stocks rise, dollar set for 10-day losing streak, as investors count on Fed rate cuts
LONDON, Dec 4 : Global shares edged up on Thursday, powered by expectations that a U.S. rate cut next week will support the world's largest economy after a raft of data showed employment is slowing, while the dollar fell for a tenth straight day against a basket of currencies, set for its longest losing streak in over 50 years.
Japanese stocks rallied sharply after an auction of government bonds drew strong demand from investors, which helped set the tone for the broader equity market. In Europe, the STOXX 600 was up 0.1 per cent and still headed for a modest weekly gain.
U.S. stock futures were slightly positive on the day, suggesting a steady start to trading later on, following Wednesday's rally that was led by the small-cap Russell 2000 index, which jumped 1.9 per cent, while the S&P 500 rose for a second day.
The gains came after U.S. private payrolls data posted their biggest drop in more than two-and-a-half years, and following a survey of the services sector that showed activity held steady in November while hiring slowed.
Fed funds futures are pricing a near-90 per cent chance of a quarter-point cut at the U.S. central bank's next meeting on December 10, compared with an 83.4 per cent chance a week ago, according to the CME Group's FedWatch tool.
The dollar index, which tracks the U.S. currency's performance against six others, was last down 0.05 per cent on the day, heading for a tenth straight daily decline, making this its longest stretch of losses since at least 1971, according to LSEG data.
The yield on the U.S. 10-year Treasury bond was last up 2.7 basis points at 4.083 per cent, after the Financial Times reported on Wednesday bond investors had expressed concerns to the U.S. Treasury that Kevin Hassett, a candidate to replace Jerome Powell as Fed chair next year, could aggressively cut interest rates to align with President Donald Trump's preferences.
"Hassett will likely have the same issue as Governor (Stephen) Miran presently does if he were to advocate for any uber-dovish jumbo rate reductions. Namely, that unless there is a coherent economic argument for such policy action, he simply won’t be able to garner the votes from enough FOMC members in support of such a move," Michael Brown, senior research strategist at Pepperstone, said.
In Japan, the government's debt sale drew the strongest demand in more than six years, which helped soothe some investor nerves about the country's long-term finances that has stoked similar worries about other economies.
"The 30-year JGB auction was unexpectedly strong," said Shoki Omori, chief desk strategist for rates and FX at Mizuho in Tokyo. "The extent of prior selling appears to have imparted a sense of valuation cheapness, thereby encouraging demand."
But follow-through for longer maturities "remains fragile, and sentiment will require multiple solid auctions to improve," he added. The yield on the 30-year Japanese government bond was down 3 bps at 3.39 per cent.
The dollar was last down 0.4 per cent at 154.67 against the yen, which is heading for its largest weekly gain against the U.S. currency in over two months.
The yen got another boost from a Reuters report that Bank of Japan is likely to raise interest rates in December with the government expected to tolerate such a decision, citing three government sources familiar with the deliberations.
Meanwhile, the yuan softened a touch, leaving the dollar up 0.1 per cent at 7.0664 yuan in offshore trading in Hong Kong. The Chinese currency hit its strongest level against the dollar in more than a year on Wednesday.
Precious metals cooled after a recent hot streak. Gold was last down 0.3 per cent at $4,192 an ounce, while silver fell 1.8 per cent to $57.41 an ounce, after hitting a record high of $58.98 on Wednesday.
Brent crude was last up 0.4 per cent at $62.92 a barrel.
