Share markets suffered an end-of-year wobble on Thursday, but bonds made a stunning round trip on the general belief that many countries will cut interest rates in 2024.
Wednesday saw Wall Street’s most significant decline since September. There is no apparent reason, but with holidays approaching and a last U.S. data dump anticipated later, neither Asia nor Europe resisted.
Europe’s STOXX 600 index (.STOXX) dipped 0.4% early on as the car sector (.SXAP) sank 1% and tech (.SX8P) and travel (.SXTP) fell 0.5%.
After the European Central Bank authorized its 600 million euros ($656.88 million) stock buyback plan, Commerzbank (CBKG.DE) shares rose about 3%.
U.S. futures rose again after Wednesday’s 1.3%–1.5% increase. Bond markets rallied despite Wall Street beatings.
Italy’s 10-year bond rates, representing Rome’s borrowing costs, plummeted to their lowest since August 2022, while benchmark 10-year Treasuries sank to 3.86%, virtually exactly where they started the year. GBD/EUR
It completes a spectacular round trip after they reached 5% in October when investors expected a higher-for-longer Fed. It shows how the reverse is priced in, said BofA strategist Elyas Galou.
“Everyone expects a soft landing to happen, everyone expects bond yields to be lower and everyone expects Fed rate cuts,” he said.
After Japan raised its fiscal-year GDP forecasts to 1.6%, the yen strengthened to 142.81 per dollar.
After weaker-than-expected U.K. inflation statistics caused its worst decline since October on Wednesday, the dollar index hardly moved, and Britain’s pound stabilized.
The euro was also at a halt while the ECB debated reducing eurozone interest rates. /FRX
“Monetary policy may loosen if inflation is steady and approaching our 2% objective. ECB Vice President Luis de Guindos told 20 Minutos on Thursday that it’s too early.
TIME FOR Turkey
The final third-quarter GDP estimates and weekly unemployment claims report will be the year’s penultimate data dump.
The menu includes turkey. Its central bank will likely raise interest rates by 250 basis points to 42.5% and return to tried-and-true inflation-fighting techniques.
After Yemen’s Iran-aligned Houthi troops attacked ships in the Red Sea, Brent oil lingered around $80 a barrel on concerns about global trade disruptions and Middle East geopolitics. Brent closed at $79.93 and U.S. crude at $74.45 a barrel.
Japan’s Nikkei stock index (.N225) fell 1.5% from long-term highs overnight, while China’s blue-chips (.CSI300) rallied 1.25% from a near five-year low. Gold rose nearly 12% this year to $2036.19 per ounce.
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