Global shares drift in absence of guidance from Wall Street

London/Sydney — Global shares drifted on Friday in the absence of guidance from Wall Street, which was closed for the Thanksgiving holiday on Thursday, but were still on course for their best month since November 2020.

An indecisive Asia session extended to Europe, with the Stoxx 600 share index flat in early dealings. Both S&P 500 futures and Nasdaq futures were also little changed.

In geopolitical news, Israel and Hamas started a four-day ceasefire on Friday and the militants were set to release 13 Israeli women and child hostages later in the day, the first sign of detente in the near seven-week-old war.

MSCI’s index of global shares was flat, but still headed for a monthly gain of 8.5% after investors grew increasingly confident that US interest rates have peaked, with the market narrative shifting to the timing of cuts.

The US central bank has raised benchmark borrowing costs by more than five percentage points since March 2022 as part of a global monetary tightening cycle.

“Weaker (economic) data and weaker inflation in the US has given markets hope you are going to start to see rate cuts,” said Peter Doherty, investment management director at Arbuthnot Latham in London.

“But the debate is whether we should be taking profits now,” he added, given the potential for a “re-acceleration of US growth,” after the world’s largest economy confounded recession forecasts throughout 2023.

Despite optimism having surged across global markets this month, there may also be a lull ahead as investors position their portfolios for 2024, some experts said.

“You get the talk of the so-called Santa rally, but often times Santa rally doesn’t really occur in the last two weeks of December,” said Shane Oliver, chief economist at AMP.

“So we could have a couple of weeks with the markets sort of just meandering around and lacking direction.”

In Europe, the euro was flat against the dollar at $1.091 as slightly better than expected eurozone factory data was balanced out by data showing the German economy had contracted.

US 10-year Treasury yields, which set the tone for borrowing costs worldwide, were up 7 bps to 4.4841%, still comfortably below the 5% milestone reached last month.

Minutes from the latest Fed policy meeting signalled there would not be more hikes unless progress against taming inflation faltered.

Germany’s 10-year bund yield rose for a third session, to 2.655%, reflecting pushback from ECB officials against speculation they were ready to start thinking about cutting rates.

The dollar index, which measures the US currency against six peers, was on the back foot at 103.71, nearing a three-month low as rate cut bets reduced the appeal of holding dollars.

In the UK, however, where the Bank of England is now viewed as having to keep interest rates at a 15-year high until late next summer, sterling perched near a 2-1/2-month top at $1.2540. Money markets are tipping the Fed to cut by June.

In Asia, Japanese stocks opened for trading after a holiday, with the Nikkei climbing 0.7% to charge back towards a 33-year high hit on Monday.

Data on Friday showed that Japan’s core consumer inflation picked up slightly in October, though by less than expected.

Oil prices were mostly flat after tumbling more than 1% on concerns over a delayed Opec+ meeting. Brent crude futures nudged 0.1% to $81.51 a barrel.

Gold was steady at $1,992 per ounce.

Reuters