As Global Stocks Fall, Dollar and Bond Yields Hold Near Multi-Month Highs!
The US dollar and bond yields held near multi-month highs today on expectations that the Federal Reserve would slow its pace of easing, while global shares were mostly lower, with investors awaiting Nvidia's earnings release later in the week. .
US President-elect Donald Trump's new administration began to take shape with nominations for health and defense roles last week, but two key positions for financial markets, Treasury Secretary and Trade Representative, are not completed yet.
Trump's pick of vaccine skeptic Robert F. Kennedy Jr. for the top US health job has already led to a ripple effect in the health care sector, with drugmakers falling late last week .
"It should be a quieter week as the latest relentless wave of US macro and political news flow in theory slows with the top story on this front being about potential political appointments for the new Trump administration," said the head of the global economy and Deutsche Bank. thematic research Jim Reid.
Trump's plans for lower taxes and higher tariffs are expected to boost inflation and reduce the Fed's aim to ease interest rates. US Treasury yields held near multi-month highs on Monday, boosted by bets on less aggressive Fed rate cuts. The benchmark 10-year yield remained steady at 4.4256%, while the last two-year yield stood at 4.2823%.
Futures imply a 60% chance the Fed will ease by a quarter point in December and price only 75 basis points of cuts by the end of 2025, compared with more than 100 a few weeks ago. This followed comments by Fed Chairman Jerome Powell last week signaling that borrowing costs could remain higher for longer.
The shifting outlook for US rates and inflation lifted the dollar to a one-year high last week. The dollar index, which measures the currency against a basket of six others, was steady at 106.69, slightly below last week's peak of 107.07. Sterling last bought $1.2618, falling near last week's six-month low, while the euro stood at $1.0547.
Global stock markets were slightly lower as investors considered the latest developments with Trump's top team and the outlook for monetary policy. MSCI's broadest gauge of world shares (.MIWO00000PUS), new tab opens was up 0.1%, while the pan-European STOXX 600, new tab opens was up 0.2%. The main indexes in Frankfurt, open new tab London, open new tab and Paris, open new tab fell 0.1% to rise 0.2%.
Nasdaq futures were gaining 0.5%, after the index fell for five straight days last week. S&P 500 futures rose 0.1% ahead of Nvidia's third-quarter results on Wednesday, where analysts expect the artificial intelligence chip leader to post a rise in revenue.
Shares of Nvidia are up nearly 200% this year, with its heavy weighting in the S&P 500 partly responsible for loading the index to record highs this year. But its multi-year run has also raised the bar for best earnings performance, and a slide could fuel concerns that the market's AI hopes have outstripped reality.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan opened a new tab, advancing 0.2%. Japan's Nikkei 225, opens a new tab, fell 1.1%, dragged down by falling technology stocks.
Bank of Japan Governor Kazuo Ueda reiterated on Monday that the central bank will continue to raise rates if economic and price developments move in line with its forecasts, but did not mention whether a hike could happen in December.
However, he later told a news conference that keeping inflation-adjusted real interest rates low for too long could cause excessive inflation and force the BOJ to raise interest rates quickly. Ueda's comments were closely watched by investors for clues on the BOJ's next rate hike.
The Japanese currency has fallen about 7% since October against a rising dollar and last week weakened past the $156 level for the first time since July, keeping traders on alert for any intervention by Japanese authorities. It was last slightly lower at 154.61 per dollar.
In commodities, oil prices were mixed. Brent crude futures were steady at $71.03 a barrel, while U.S. crude futures fell 0.2% to $66.88. Spot gold jumped 1.1% to $2,590 an ounce, recovering from its sharp decline last week.
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