NEW YORK: The dollar eased and global equities rebounded on Friday as Wall Street rallied on doubts that interest rates will go higher even after Federal Reserve Chair Jerome Powell cautioned that tighter monetary policy might be needed to tame inflation.
Powell’s remarks on Thursday that the fight to restore price stability “had a long way to go” at first. But a softer labour market as seen in last week’s unemployment report and speculation that next week’s consumer prices index (CPI) will show slower inflation spurred bulls into action.
US consumer sentiment fell for a fourth straight month in November and households’ expectations for inflation rose again, with their medium-term outlook for price pressures at the highest in more than a dozen years, the University of Michigan’s preliminary reading of consumer sentiment showed on Friday.
MSCI’s gauge of global equity performance closed up 0.76 per cent, while Wall Street’s main indices surged 1 per cent or more. The Dow Jones Industrial Average rose 1.15 per cent, the S&P 500 gained 1.56 per cent and the Nasdaq Composite added 2.05 per cent, its biggest percentage jump since May.
For the week, the Dow rose 0.7 per cent, the S&P 500 gained 1.3 per cent and the Nasdaq advanced 2.4 per cent.
Earlier in Europe, the pan-regional STOXX 600 index closed down 1.0 per cent.
US Treasury yields rose sharply on Thursday after a weak 30-year bond auction. The extra yield needed to get the issue sold was the largest in several years as was the amount dealers were forced to absorb, said Dec Mullarkey, managing director for investment strategy and asset allocation at SLC Management in Boston.
“The market continues to struggle with what is the right premium or clearing level to fund the large pipeline of government debt issuance,” he said.
“Investors are worried about the prospects of higher rates for longer and the price volatility that may invoke,” he said, reflecting a variance of views between bond and equity investors about rates.
The two-year Treasury yield, which reflects interest rate expectations, rose 3.2 basis points to 5.054 per cent, while the benchmark 10-year yield slid 0.6 basis points at 4.624 per cent.
Futures show about a 35 per cent probability the Fed will cut its overnight lending rate by 25 basis points by next May, according to the CME’s FedWatch tool, but the market expects that rate to stay above 5 per cent through June.
Asian stocks closed the day down as worries over China, the world’s second-biggest economy, resurfaced after data on Thursday showed Chinese consumer prices dipped again. — Reuters
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