Global stocks surge, Dollar falls

Investors bet the federal may be done hiking rates

Global stocks surge, Dollar falls
The pan-European STOXX 600 index rose 1.58 per cent and MSCI's gauge of stocks across the globe gained 1.96 per cent, which would be its biggest daily percentage jump since November 2022 — Reuters pic

NEW YORK ― Global stock indexes jumped and the US dollar fell yesterday on investor optimism that the Federal Reserve may be done hiking interest rates, while benchmark 10-year Treasury yields fell to three-week lows.

Investors also took in yesterday’s (2 Nov) actions by the Bank of England, which kept rates at a 15-year high and stressed that it did not expect to start cutting them any time soon.

The Fed on Wednesday (1 Nov) held interest rates steady as expected, and while Chair Jerome Powell left the door open to more tightening, he also nodded to the impact of a recent surge in bond yields on the economy.

Even though neither the Fed nor the BoE signalled that rate cuts were likely any time soon, just the glimpse of light at the end of the tunnel after 20 months of relentless hiking was enough to recharge the bulls.

Bond yields extended their move lower from Wednesday, on relief that the US Treasury Department announced smaller-than-expected increases in longer-dated Treasury supply.

On Wednesday, the Treasury said it would raise auction sizes for longer-dated debt by less than was expected and noted that it expects one more quarter of auction size increases to meet its financing needs.

Benchmark 10-year note yields were last down 12 basis points at 4.669 per cent and earlier reached 4.626 per cent, the lowest since October 13.

In US stocks, the S&P 500 registered its biggest one-day percentage gain since April 27.

Upbeat quarterly corporate results added to bullish sentiment on Wall Street. Apple shares closed up 2.1 per cent ahead of its results after the closing bell.

The Dow Jones Industrial Average rose 564.5 points, or 1.7 per cent, to 33,839.08, the S&P 500 gained 79.92 points, or 1.89 per cent, to 4,317.78 and the Nasdaq Composite added 232.72 points, or 1.78 per cent, to 13,294.19.

The pan-European STOXX 600 index rose 1.58 per cent and MSCI’s gauge of stocks across the globe gained 1.96 per cent, which would be its biggest daily percentage jump since November 2022.

The moves followed sharp gains overnight in Japanese stocks.

In foreign exchange, the US dollar was broadly lower on the perception that US rate had peaked, raising risk appetite.

Brad Bechtel, global head of FX, at Jefferies in New York, said the Fed is probably done hiking rates, but he could see the rationale for tightening one more time given the still-resilient US economy.

“But at the same time, everyone is looking at a slowdown and inflation is going in the right direction,” Bechtel said.

Fed funds futures indicated a sub-20 per cent chance that US rates will rise in December.

Sterling, meanwhile, held firm after the BoE decision. The pound rose as much as 0.6 per cent against the dollar to US$1.2225 (RM5.79), its highest level in 1-1/2 weeks. Sterling was last up 0.4 per cent at US$1.2201.

The dollar index, which measures the greenback against six other major currencies, was last 0.3 per cent lower at 106.18.

Bitcoin, sometimes traded as a proxy for risk-taking, broke above US$35,000 to hit its highest level since May 2022.

Oil prices ended sharply higher in the wake of the Fed decision to leave rates unchanged, with US crude futures settling at US$82.46 a barrel, up US$2.02, and Brent crude futures settling at US$86.85, up US$2.22.

Also, US non-farm payroll data is due out on Friday. A tight labour market is considered a key factor in the outlook for interest rates. ― Reuters