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As investors expect Fed rate cuts, stocks rise and the dollar is set to lose 10 days in a row.

As investors expect Fed rate cuts, stocks rise and the dollar is set to lose 10 days in a row.
As investors expect Fed rate cuts, stocks rise and the dollar is set to lose 10 days in a row.

Global shares rose on Thursday as investors hoped that the U.S. would cut rates next week to support the world's biggest economy. Meanwhile, the dollar dropped for the tenth consecutive day against a basket currency, marking its longest losing streak since over 50 years. Japanese stocks rose sharply following a strong auction of government bond, which set the tone for broader equity markets. STOXX 600 in Europe was up by 0.1%, and is still on track for a modest gain each week. U.S. Stock Futures were slightly positive for the day and suggested a steady trading start later in the day. This follows Wednesday's rally, led by the Russell 2000 small-cap index which rose 1.9%. The S&P 500 also gained ground. Gains were made after the U.S. private employment data showed their largest drop in over two-and a half years and after a survey that revealed activity in the services sector remained steady while hiring slowed.

FedWatch, a tool of the CME Group, shows that Fed funds futures have a near-90% probability that the central bank will cut interest rates by a quarter point at its next meeting scheduled for December 10. This is compared to an 83.4% possibility a week earlier.

According to LSEG, the dollar index (which tracks the U.S.'s currency performance against six other currencies) was down 0.05% last day. This is the longest losing streak since at least 1971. The yield on a 10-year Treasury bond in the United States was last up by 2.7 basis points to 4.083%. This is after the Financial Times reported that bond investors expressed concern to the U.S. Treasury on Wednesday about Kevin Hassett's potential to aggressively reduce interest rates to match President Donald Trump’s preferences.

Hassett would likely face the same problem as Governor Miran does today if he advocated for any ultra-dovish rate reductions on jumbo bonds. Michael Brown, senior strategist at Pepperstone said that without a convincing economic case for such a policy, Hassett will not be able garner enough votes to support such a move. In Japan, a government debt sale attracted the highest demand in over six years. This helped calm investor nerves regarding the country's finances on a long-term basis, which has caused similar concerns about other economies.

Shoki Omori is the chief desk strategist at Mizuho, Tokyo. He said that "the 30-year JGB was unexpectedly strong." The extent of previous selling seems to have created a feeling of cheap valuation, which in turn encouraged demand.

He added that the sentiment would need to be improved by multiple auctions. The 30-year Japanese government bonds yield was 3 basis points lower at 3.39%. Dollar was down last by 0.4% to 154.67 yen. This is the largest weekly gain for the U.S. dollar in more than two months. The yen was given a boost by a report stating that the Bank of Japan will likely raise interest rates next month, and the government is expected to tolerate this decision. Three government sources who are familiar with these deliberations were cited in the report.

In Hong Kong, offshore trading, the yuan weakened a bit, resulting in a 0.1% increase in the dollar at 7,0664 yuan. On Wednesday, the Chinese currency reached its highest level in over a year against the US dollar. After a recent run of hot metals, precious metals have cooled. Silver fell 1.8%, to $57.41 per ounce after reaching a record of $58.98 an ounce on Wednesday. Gold dropped 0.3%, at $4,192. Brent crude rose 0.4% to $62.92 per barrel. Reporting by Gregor Stuart Hunter, Editing by Lincoln Feast; Sonali Paul, Andrew Heavens, and Chizu Nomiyama

(source: Reuters)