NEW YORK, Nov 29 — MSCI’s global stock index advanced yesterday while the dollar fell as a Federal Reserve official signalled that the US central bank was done raising rates and could even consider rate cuts if inflation keeps easing.
The US dollar index hit a 3-1/2 month low and was on track for its biggest monthly drop in a year as investors took the view that growth in the world’s largest economy is starting to slow down, with the market starting to price in a rate cut by the first half of the year.
Fed Governor Christopher Waller bolstered these bets by flagging the possibility of lowering the Fed policy rate in the months ahead if inflation continues to come down. Waller also said he was “increasingly confident“ the current interest rate setting would prove adequate to lower inflation to the Fed’s 2 per cent target.
Another Fed governor, Michelle Bowman, said the central bank will likely need to raise borrowing costs further in order to bring inflation back down to its target.
Traders appeared to take their cues from Waller with increased bets for the first rate cut taking place as soon as March with the probability for a 25 basis-point cut last at nearly 33 per cent, up from 21.5 per cent on Monday, according to the latest data from CME Group’s Fedwatch tool. The majority expected a cut of at least one notch in May, according to CME data.
The market saw Waller’s comments as the first sign the Fed “recognises they might be able to cut rates next year” while other officials “took some of the euphoria” away, according to Anthony Saglimbene, Ameriprise chief market strategist.
And Saglimbene said, “It’s normal you’ll see stocks consolidate in the last few days of a really strong month. ... For the rest of the year, momentum is biased to the upside.”
While trading in stocks was choppy, Wall Street indexes managed to close higher. The Dow Jones Industrial Average rose 83.51 points, or 0.24 per cent, to 35,416.98, the S&P 500 gained 4.46 points, or 0.10 per cent, to 4,554.89 and the Nasdaq Composite added 40.73 points, or 0.29 per cent, to 14,281.76.
MSCI’s gauge of stocks across the globe gained 0.27 per cent.
Also yesterday, a survey showed US consumer confidence rose in November after three months of declines, though households still anticipated a recession over the next year.
Later this week the spotlight will be on the US October personal consumption expenditures report (PCE), which includes core PCE, which is the Fed’s preferred measure of inflation. Also euro zone consumer inflation figures should give further clarity on where prices and monetary policy are headed there.
After the Fed commentary, US Treasury yields dipped with benchmark 10-year notes down 6 basis points to 4.328 per cent, from 4.388 per cent late on Monday.
In currencies, the dollar index fell 0.368 per cent, with the euro up 0.32 per cent to US$1.0988 (RM5.13).
The Japanese yen strengthened 0.82 per cent versus the greenback at 147.47 per dollar, while Sterling was last trading at US$1.2694, up 0.55 per cent on the day.
With some encouragement from the weaker dollar, spot gold prices were up 1.4 per cent at US$2,040.79 an ounce after hitting their highest level since May in their fourth consecutive gain.
Oil prices settled higher yesterday on the possibility that Opec+ will extend or deepen supply cuts, a storm-related drop in Kazakh oil output and the weaker US dollar.
US crude settled up 2.07 per cent at US$76.41 per barrel and Brent settled at US$81.68, up 2.13 per cent on the day. — Reuters