Stocks rise, dollar falls as inflection signs grow: Markets wrap

Stocks advanced in Asia and the dollar weakened on mounting speculation the Federal Reserve is nearing the end of its tightening cycle. Japan’s Nikkei 225 Stock Average touched a fresh 33-year high.

A gauge of regional equities headed for its highest close in two months after dovish comments from Federal Reserve officials last week bolstered bets the central bank is done with interest-rate hikes. The dollar slipped against all its Group-of-10 peers while an index of emerging-market currencies climbed to the highest since February.

Traders are currently pricing in around 30% probability of the first Fed rate cut in March after Fed Vice Chair for Supervision Michael Barr said Friday officials are likely at or near the end of their tightening campaign. Still, San Francisco Fed President Mary Daly said policymakers aren’t certain inflation is on a path to their 2% target.

Treasuries edged lower before a 20-year bond auction that will help gauge whether investors are confident 2023’s selloff is over once and for all. The Treasury market is poised to post its first monthly returns in November, ending a six-month losing streak. Australian and New Zealand bonds also retreated.

Investors should expect continued downward pressure on Treasury yields and the dollar as dovish Fed narrative remains in place, according to Win Thin, global head of currency strategy at Brown Brothers Harriman & Co.

Markets’ optimism, however, seems a little too excessive. “Does one month of somewhat favorable inflation data really warrant such a massive move in rates?” he wrote in a note. “We think not and yet here we are. We must respect this move while wholeheartedly disagreeing with it.”

Nikkei at 33-year high

The Nikkei 225 Stock Average briefly surpassed its June intraday peak to reach the highest level since 1990, extending its gains this year to more than 28%. The index has been boosted by an extended period of yen weakness, solid company earnings, and corporate governance reforms championed by the Tokyo Stock Exchange.

The offshore yuan strengthened after the People’s Bank of China boosted its daily reference rate for the currency to the strongest level since August. The nation’s commercial lenders on Monday kept their benchmark lending rates unchanged, in line with the central bank’s decision this month to maintain policy rates in favor of other means to support stimulus spending.

“The yuan is likely past the turning point versus the dollar in line with most of developed market and Asian peers.” said Fiona Lim, a senior foreign-exchange analyst at Malayan Banking Bhd. “Notwithstanding some downside pressures due to its own economic weakness, the yuan is also very affected by cyclical pressure that is due to its policy divergence versus the Fed.”

US equity futures ticked marginally lower in Asia after the S&P 500 rose above 4,500 on Friday to cap its third straight weekly gains.

In Argentina, libertarian candidate Javier Milei defeated Economy Minister Sergio Massa to win Sunday’s presidential runoff. There was no immediate reaction in the markets due to a holiday.

Oil rose as investors looked ahead to an OPEC+ meeting on supply that will shape market balances into 2024.

Investors are also watching for any impact from the tensions at OpenAI. OpenAI’s interim Chief Executive Officer Mira Murati plans to re-hire her ousted predecessor Sam Altman and former President Greg Brockman in a capacity that has yet to be finalized, according to a report.

Chinese smart-phone giant Xiaomi Corp. will announce earnings Monday while Nvidia Corp. releases its results Tuesday.

Trading is likely to become more muted toward the end of the week with the US Thanksgiving Holiday on Thursday.

Key events this week:

• European Central Bank governing council members Pablo Hernandez de Cos, Francois Villeroy de Galhau, Boris Vujcic speak at separate events, Monday
• Bank of England Governor Andrew Bailey speaks, Monday
• US Conf. Board leading index, Monday
• Hong Kong CPI, Tuesday
• European Central Bank President Christine Lagarde speaks, Tuesday
• Canada CPI, Tuesday
• Federal Reserve Nov. policy meeting minutes, Tuesday
• Nvidia earnings, Tuesday
• Eurozone consumer confidence, Wednesday
• US initial jobless claims, University of Michigan consumer sentiment, durable goods, Wednesday
• Eurozone PMIs, Thursday
• UK S&P Global / CIPS Manufacturing PMI, Thursday
• European Central Bank publishes account of Oct. policy meeting, Thursday
• Thanksgiving holiday in the US, Thursday
• Japan CPI, Friday
• Germany GDP, Friday
• US manufacturing PMI, Friday
• Black Friday sales begin, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:44 p.m. Tokyo time. The S&P 500 rose 0.1% on Friday
• Nasdaq 100 futures fell 0.3%. The Nasdaq 100 was little changed
• Japan’s Topix index fell 0.7%
• Hong Kong’s Hang Seng Index rose 1.5%
• China’s Shanghai Composite Index rose 0.5%
• Australia’s S&P/ASX 200 Index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.1% to $1.0927
• The Japanese yen rose 0.5% to 148.93 per dollar
• The offshore yuan rose 0.5% to 7.1779 per dollar
• The Australian dollar rose 0.6% to $0.6553

Cryptocurrencies

• Bitcoin rose 0.6% to $37 213.45
• Ether rose 1% to $2,004.1

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.45%
• Japan’s 10-year yield was unchanged at 0.750%
• Australia’s 10-year yield advanced four basis points to 4.50%

Commodities

• West Texas Intermediate crude rose 0.7% to $76.45 a barrel
• Spot gold was little changed