European stocks near two-year highs; Bond Kiosk: Wrapping the Markets

(Bloomberg) — European stocks are hovering around their highest levels since January 2022, and U.S. stock futures rose as investors brace for interest rate cuts from the Federal Reserve next year. Gold was trading near the record high it hit earlier this month.

Most read from Bloomberg

The Stoxx Europe 600 index was little changed after erasing an early advance in thin holiday trading, and is on track for a gain of about 13% this year. Shares of major oil companies fell with the decline in crude prices. Nasdaq 100 futures rose 0.2% and S&P 500 futures were volatile after Wednesday's gains on Wall Street.

Bonds fell after Wednesday's strong rally that saw yields on 5- to 30-year Treasuries fall by at least 10 basis points, and Germany's 10-year yield hit a new low in 2023. The gains pushed a global gauge of the bond market to On the cusp of its best ever high in two months.

Vishnu Varathan, head of economics and strategy at Mizuho Bank Limited in Singapore, said expectations of monetary policy easing are coming to the fore. “The ferocity of the bond market rally has actually increased total returns for investors – there is a sense that markets are signaling that we are halfway to easy monetary policy again,” he said.

Gains in Asia were led by Chinese stocks, which are on track for their best day in four months, supported by a rotation in some of the worst-performing sectors in 2023. Stocks in Hong Kong, India and Australia also rose.

A gauge of global stocks is headed toward its highest close since February 2022, up more than 15% from its October low, reflecting traders' optimism for interest rate cuts next year. Traders ramped up their bets on federal interest rate cuts early in March, according to Fed swaps pricing. Jobs data due later on Thursday may give more clarity on the outlook for the economy and interest rates.

The story continues

Gains in bonds were helped by abundant demand for five-year Treasuries on Wednesday, which followed strong appetite for a two-year auction the day before. The strong appetite for securities is a sign that investors want to secure attractive returns ahead of expected cuts from the Federal Reserve. The dollar fell against all of its G10 peers, with the US currency gauge heading for a fifth day of declines.

In Asia, the yen rose for a second day after Bank of Japan Governor Kazuo Ueda continued to pave the way for the country's first interest rate increase since 2007.

China's CSI 300 index is headed for its first weekly gain since early November, with technology and renewable energy stocks contributing the most to the rise on Thursday.

Oil fell amid signs of building US inventories. Bitcoin rose, trading above $43,000 amid renewed speculation that the U.S. Securities and Exchange Commission is close to approving an exchange-traded fund that invests directly in the largest token.

Main events this week:

• US Wholesale Inventories, Initial Jobless Claims, Thursday

• House prices nationwide in the UK, Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 index was unchanged as of 9:20 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures rose 0.2%

• Dow Jones Industrial Average futures fell 0.1%

• The MSCI Asia Pacific Stock Index rose 1.2%.

• MSCI Emerging Markets Index rises 1.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%.

• The euro rose 0.1 percent to $1.1117

• The Japanese yen rose 0.6 percent to 140.93 to the dollar

• The yuan in external transactions rose 0.5 percent to 7.1166 per dollar

• There was little change in the pound sterling at $1.2794

Digital currencies

• Bitcoin fell 0.9% to $42,995.95

• Ethereum rose 1.2% to $2,388.21

Bonds

• The yield on 10-year Treasury bonds rose by three basis points to 3.82%.

• The yield on German 10-year bonds rose three basis points to 1.92%.

• The yield on British 10-year bonds rose four basis points to 3.48%.

Goods

• Brent crude fell 0.9 percent to $78.95 a barrel

• Gold in spot transactions fell 0.2 percent to $2,073.51 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Chiranjeevi Chakraborty and Richard Henderson.

(A previous version corrected the first paragraph to show gold trading near a record level)

Most read from Bloomberg Businessweek

©2023 Bloomberg L.P