Latest News

Stocks soar, US yields fall as Fed rate-cut bets increase

On Monday, global stocks rose for the second consecutive session as expectations of a December rate reduction from the U.S. Federal Reserve reduced recent concerns over stretched valuations in AI while yields on longer-dated U.S. Treasury bonds eased.

The stock market dropped last week, with the largest percentage weekly drop since early August. This was due to market pessimism about the prospects of an interest rate cut and the impact the prolonged U.S. shutdown had on the economy. There were also lingering worries over the high valuations of AI-related firms. Stocks rallied by the end of last week, after New York Fed president John Williams stated that interest rates could fall in the short term. Other policymakers were insistent on borrowing costs remaining the same for the time being. Williams' comments on Monday were echoed by Fed Governor Christopher Waller who stated that data available indicates that the U.S. employment market is still weak enough to warrant a further quarter-point reduction in interest rates.

Sam Stovall is the chief investment strategist at CFRA Research, New York. He said that John Williams was the cavalry that came over the ridge when he indicated that a December rate reduction was not off the table. This was encouraging for investors and they decided to plough back into equity.

"But, then again, it is a low-volume week. Maybe this is just a temporary relief rally."

The U.S. market will be closed for Thanksgiving on Thursday. According to CME's FedWatch Tool the markets are now pricing in a 79.1% probability of a 25 basis point cut at the December meeting. This is up from 42.4% one week ago. Goldman Sachs' chief economist Jan Hatzius stated in a Sunday note that he anticipates a further cut by the Fed, followed two additional moves in March 2026 and June 2026.

Wall Street stocks rose in early trading. The sector of communication services saw a nearly 4% surge, while Alphabet, the parent company of Google, jumped roughly 6%. The Dow Jones Industrial Average rose by 277.75, or 0.60 percent, to 46.523.16, while the S&P 500 gained 106.40, or 1.61 percent, to 6,709.39, and the Nasdaq Composite climbed 596.77, or 2.68 percent, to 22869.86. Investors were encouraged by the progress made in the peace agreement between Ukraine and Russia, as well as expectations of higher interest rates. MSCI's index of global stocks rose 11.93 points or 1.23% to 982.69, and was on course for its biggest daily percentage gain in November. The pan-European STOXX 600 ended the session with a 0.14% gain after reaching a maximum of 0.71%. This week, the U.S. government will release data on retail sales and producer price levels. The eagerly anticipated budget of British finance minister Rachel Reeves is due Wednesday. U.S. officials and Ukrainians are working on a plan that will end the conflict with Russia. They modified an earlier proposal, which was seen by Kyiv and Europe as being too favorable to Moscow. This weighed down on oil prices, as a deal would allow more Russian oil to be supplied through a easing of sanctions. Treasury yields in the United States were lower due to expectations of interest rates. The yield on the benchmark 10-year U.S. notes dropped 2.9 basis points, to 4.034%. The dollar index, which measures a dollar's value against a basket, fell 0.07% at 100.17. The euro was down 0.1% to $1.1523. The pound rose 0.11%, to $1.3109. The markets were also looking for any signs of possible Japanese intervention. The yen fell 0.3% to 156.82 dollars per yen. The Japanese yen is down 1.8% versus the dollar in this month. Takuji aida, an advisor to Prime Minister Sanae Takaichi said on Sunday that Japan could actively intervene in currency markets to mitigate the negative impact of a weakening yen.

U.S. crude oil rose by 1.29%, to $58.81 per barrel. Brent was up to $63.34 a barrel. This is a 1.25% increase on the day. Investors are now more focused on the possibility of a U.S. rate cut than the prospects of a Ukrainian peace agreement.

(source: Reuters)