Key stock markets in Europe and Asia rallied yesterday as expectations built that the US Federal Reserve will hike interest rates next month, while the US dollar retreated after four sessions of gains.
US stock indexes fell slightly in choppy trading after a strong rally in the previous session, while US crude dipped below $40 a barrel before rebounding.
US data showed fewer Americans filed for unemployment benefits last week, further supporting a view that the Federal Reserve will raise interest rates in December.
“This morning’s data simply confirmed that the economic landscape is healthy enough for the Fed to continue with its desired timing for liftoff, which for now the market is expecting to be December,” said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.
Futures traders yesterday placed a 72 per cent chance of the Fed raising rates next month, up from 68 per cent following the release of the Fed minutes on Wednesday afternoon, according to the CME Group’s FedWatch.
The Dow Jones industrial average fell 12.61 points, or 0.07 per cent, to 17,724.55, the S&P 500 lost 3.46 points, or 0.17 per cent, to 2,080.12 and the Nasdaq Composite dropped 0.29 points, or 0.01 per cent, to 5,074.92.
The healthcare sector weighed on the benchmark S&P 500 index after insurer UnitedHealth Group issued a weak forecast.
The pan-European FTSEurofirst 300 index climbed 0.4 per cent, helped by a jump in shares of food and facilities group Sodexo, which said it would cut costs to cope with a volatile global economy.
Markets in London and Frankfurt were up 0.8 per cent and 1.1 per cent, respectively.
Japan’s Nikkei rose 1.1 per cent, and an index of major global markets rose 0.7 per cent.
The US dollar index, measured against a basket of currencies, was off 0.6 per cent after hitting a seven-month high a day earlier.
The euro rose 0.6 per cent against the dollar.
Yields on longer-dated Treasuries fell as investors braced for the Fed to gradually raise rates after December.
Benchmark 10-year Treasury prices rose 7/32 for a yield of 2.2447 per cent, while the price for the 30-year note rose 24/32 for a yield of 3.0040 per cent.
US crude was down one per cent at $40.29 a barrel, after dipping below $40 for a second day, with rising US stockpiles serving as the most visible evidence of oversupply in oil markets. Benchmark Brent crude rose 0.5 per cent to $44.37 a barrel.
Spot gold rose 1.1 per cent, rebounding from near six-year lows.
“I think this is pre-Thanksgiving week short-covering which has its roots in the Fed minutes yesterday,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia.