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BLOOMBERG
Treasuries continued their November rally as expectations grew that the Federal Reserve is done with policy tightening and may start cutting interest rates next year.
European equities and US futures edged higher, following a mixed session in Asia. German bonds headed for their longest streak of gains in more than four weeks as state data showed inflation continued to slow. The dollar dropped for a fifth day. “Attention will now move to Chair Powell’s speech to see if the tone points to a clear pivot towards easing,” Daragh Maher, head of FX strategy for the US at HSBC, wrote in
a note. “If it materialises, this would clearly be a challenge to our bullish US dollar view.” Bonds are rallying at the fastest monthly pace since 2008 as recent data show inflation continues to slow and Federal Reserve officials strike a dovish tone. Billionaire investor Bill Ackman is betting Fed cuts could come as soon as the first quarter — earlier than market pricing is suggesting.
The MSCI All Country World Index of stocks has gained 8.8% so far this month, its most since November 2020.
Fed swaps are anticipating over 100 basis points of rate cuts by the end of 2024 after comments from Governor Christopher Waller.
One of the most-hawkish officials, Waller said he’s “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%.”
Two-year Treasury yields dropped another seven basis points to 4.67% after shedding 15 basis points.
A Bloomberg gauge of the dollar is on track for its worst month in a year as expectations the Fed will have to reverse its most aggressive tightening cycle since the 1980s grow.
Stocks in Asia diverged. A gauge of Hong Kong shares fell over 2% and was on course to its lowest close in a year, weighed by losses in some tech firms following a growth warning by food-delivery giant Meituan. Australia remained a bright spot after cooling inflation bolstered the case for the local central bank to resume pausing interest rates next week. Gold extended gains to its highest level since May, also buoyed by hopes of a Fed policy shift.