Treasuries Rally on Fed Cut Hopes, Stocks Hit Peak: Markets Wrap
Muted advances for the S&P 500 and the Nasdaq 100 on Wednesday lifted both benchmarks to within 3% of their record closing highs achieved in February. The moves were a sign the market has inched higher after the initial tumult caused by President Donald Trump's reciprocal tariff announcement two months ago.
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Yahoo
4 minutes ago
- Yahoo
Asian shares are mixed after days of gains driven by hopes for US rate cuts
MANILA, Philippines (AP) — Asian shares were mixed on Thursday after days of gains driven by hopes for lower U.S. interest rates, while U.S. futures slipped. In Tokyo, the Nikkei 225 fell 1.4% to 42,657.94 as investors sold to lock in recent gains that have taken the benchmark to all-time records. The Japanese yen rose against the dollar after U.S. Treasury Secretary Scott Bessent said in an interview with Bloomberg that Japan was 'behind the curve' in monetary tightening. He was referring to the slow pace if increases in Japan's near-zero interest rates. Low interest rates tend to make the yen weaker against the dollar, giving Japanese exporters a cost advantage in overseas sales. The dollar fell to 146.55 Japanese yen early Thursday, down from 147.39 yen. The euro fell to $1.1703 from $1.1705. In Chinese markets, Hong Kong's Hang Seng index shed less than 0.1% to 25,597.85, while the Shanghai composite index gained 0.2% to 3,690.88. South Korea's Kospi slid 0.3% to 3,215.61, while Australia's S&P ASX 200 index added 0.5% to 8,871.80. Taiwan's TAIEX fell 0.4%, while India's Sensex edged 0.1% higher. 'Asian markets opened today like a party that ran out of champagne before midnight — the music still playing, but the dance floor thinning out,' Stephen Innes of SPI Asset Management said in a commentary. The futures for the S&P 500 and the Dow Jones Industrial Average were down less than 0.1%. On Wednesday, U.S. stocks ticked higher, extending a global rally fueled by hopes the Federal Reserve will cut U.S. interest rates. The S&P 500 rose 0.3% to 6,466.58, coming off its latest all-time high. The Dow climbed 1% to 44,922.27, while the Nasdaq composite added 0.1% to its own record set the day before, closing at 21,713.14. Treasury yields eased in the bond market in anticipation that the Fed will cut its main interest rate for the first time this year at its next meeting in September. Lower rates can boost investment prices and the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment, though they risk worsening inflation. Stocks of companies on Wall Street that could benefit most from lower interest rates helped lead the way. PulteGroup climbed 5.4%, and Lennar rose 5.2% as part of a broad rally for homebuilders and others in the housing industry. Lower rates could make mortgages cheaper to get, which could spur more buying. The cryptocurrency exchange company Bullish ended its debut day of trading after an initial public offering of more than $10 billion with a gain of nearly 84% to $68 a share. The hopes for lower interest rates are helping to drown out criticism that the U.S. stock market has broadly grown too expensive after its big leap since hitting a low in April. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed Chair Jerome Powell while doing so. But the Fed has hesitated of the possibility that Trump's sweeping higher tariffs could make inflation much worse. Fed officials have said they want to see more fresh data about inflation before moving. On Thursday, a report will show how bad inflation was at the wholesale level across the United States. Economists expect it to show inflation accelerated a touch to 2.4% in July from 2.3% in June. In other dealings early Thursday, U.S. benchmark crude rose 24 cents to $62.89 per barrel. Brent crude, the international standard, added 27 cents to $65.90 per barrel. ___ AP Business Writer Stan Choe contributed. Teresa Cerojano, The Associated Press
Yahoo
4 minutes ago
- Yahoo
Investors adopt "higher for longer" view on ECB rates
By Stefano Rebaudo and Linda Pasquini (Reuters) -Investors are increasingly pricing in a "higher for longer" interest rate environment in the euro zone, with a potential cut in March seen as a temporary blip before borrowing rates climb back above 2%. A number of market-based measures of rate expectations indicate that investors are growing less concerned about the deflationary impact of tariffs following the recent trade deal between the United States and the European Union. Shop Top Mortgage Rates Personalized rates in minutes A quicker path to financial freedom Your Path to Homeownership They're also confident that a sharp increase in fiscal spending in Germany will boost the economy, thereby reducing the need for more rate cuts in the longer term. Several investment banks, including Goldman Sachs, have revised their forecasts, now anticipating that the European Central Bank has ended its current easing cycle. While trade risks could still weigh on growth and inflation, these banks believe the ECB, which offered an upbeat assessment of the euro zone economy after its latest meeting, is likely to hold rates at 2% for the foreseeable future. Erring on the side of caution, markets are pricing in the risk of a pick up in deflationary pressure early next year if tariff negotiations falter, which is showing up as an implied ECB rate cut in March. In the meantime, the euro has risen by nearly 3% this month as investors increasingly expect the U.S. Federal Reserve to resume rate cuts in September, while the ECB stays put. "Higher for longer" was a narrative that dominated markets in 2022 and 2023 as central banks grappled with stubborn inflation stemming from the COVID pandemic and Russia's invasion of Ukraine. Here are some of the market indicators that reflect its return. ESTR FORWARDS EDGE TOWARDS 2% Forward contracts on the ECB's official overnight benchmark interest rate, the euro short-term rate (ESTR), imply around a 60% chance of a 25 basis point rate cut by March, and a deposit rate of 1.92% in December 2026. This reflects traders' assumptions about the likely path for monetary policy. 'In the short term... there is the potential of inflation undershooting. It's a bit of Trump. It's a bit of economic weakness,' said Carsten Brzeski, global head of macro research at ING. 'Our view is that inflation will remain structurally above 2% in the coming years, driven by fiscal spending and the restructuring of supply chains, which will increase costs for companies,' he said. He added that policy rates could reach the upper bound of the ECB's official 1.75% to 2.25% range for the neutral rate - that which is neither accommodative nor restrictive - and shift into tightening territory if required. EURO 5-YEAR ESTR INDEX SWAP HOVERS JUST ABOVE 2% The euro short-term rate (ESTR) 5-year overnight index swap (OIS) is seen as a barometer of the medium-term monetary policy outlook and can be loosely used as a market-implied gauge of the neutral rate. The swap rate hit a high of 2.406% in early March, when Germany agreed on the biggest overhaul to its fiscal spending in decades, and has since fallen to around 2.12%, having traded above the 2% mark consistently for the last six weeks. 'We're a bit more negative on growth than everyone else and a bit more worried about inflation than everyone else,' said Lyn Graham-Taylor, senior rates strategist at Rabobank. 'But we've literally no change for the deposit rate out till the end of 2027,' he added. EURIBOR RATES SEEN ON A MILD UPTREND IN 2027 The Euro Interbank Offered Rate reflects the average rate at which major European banks lend unsecured funds to one another. The Euribor rate also captures some credit risk because of the involvement of banks. The curve mirrors that of ESTR forwards, so it also suggests rates could dip modestly by March before rising above 2% again into 2027. Paul Hollingsworth, head of developed markets economics at BNP Paribas, believes the ECB's next move will be to hike rates in the fourth quarter of next year. 'I see the rate hike as a recalibration within the neutral the balance of data and risks shifts from the drag of tariffs toward a more positive impulse driven by fiscal policy,' he said. Sign in to access your portfolio
San Francisco Chronicle
5 minutes ago
- San Francisco Chronicle
Asian shares are mixed after days of gains driven by hopes for US rate cuts
MANILA, Philippines (AP) — Asian shares were mixed on Thursday after days of gains driven by hopes for lower U.S. interest rates, while U.S. futures slipped. In Tokyo, the Nikkei 225 fell 1.4% to 42,657.94 as investors sold to lock in recent gains that have taken the benchmark to all-time records. The Japanese yen rose against the dollar after U.S. Treasury Secretary Scott Bessent said in an interview with Bloomberg that Japan was 'behind the curve' in monetary tightening. He was referring to the slow pace if increases in Japan's near-zero interest rates. Low interest rates tend to make the yen weaker against the dollar, giving Japanese exporters a cost advantage in overseas sales. The dollar fell to 146.55 Japanese yen early Thursday, down from 147.39 yen. The euro fell to $1.1703 from $1.1705. In Chinese markets, Hong Kong's Hang Seng index shed less than 0.1% to 25,597.85, while the Shanghai composite index gained 0.2% to 3,690.88. South Korea's Kospi slid 0.3% to 3,215.61, while Australia's S&P ASX 200 index added 0.5% to 8,871.80. Taiwan's TAIEX fell 0.4%, while India's Sensex edged 0.1% higher. 'Asian markets opened today like a party that ran out of champagne before midnight — the music still playing, but the dance floor thinning out,' Stephen Innes of SPI Asset Management said in a commentary. The futures for the S&P 500 and the Dow Jones Industrial Average were down less than 0.1%. On Wednesday, U.S. stocks ticked higher, extending a global rally fueled by hopes the Federal Reserve will cut U.S. interest rates. The S&P 500 rose 0.3% to 6,466.58, coming off its latest all-time high. The Dow climbed 1% to 44,922.27, while the Nasdaq composite added 0.1% to its own record set the day before, closing at 21,713.14. Treasury yields eased in the bond market in anticipation that the Fed will cut its main interest rate for the first time this year at its next meeting in September. Lower rates can boost investment prices and the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment, though they risk worsening inflation. Stocks of companies on Wall Street that could benefit most from lower interest rates helped lead the way. PulteGroup climbed 5.4%, and Lennar rose 5.2% as part of a broad rally for homebuilders and others in the housing industry. Lower rates could make mortgages cheaper to get, which could spur more buying. The cryptocurrency exchange company Bullish ended its debut day of trading after an initial public offering of more than $10 billion with a gain of nearly 84% to $68 a share. The hopes for lower interest rates are helping to drown out criticism that the U.S. stock market has broadly grown too expensive after its big leap since hitting a low in April. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed Chair Jerome Powell while doing so. But the Fed has hesitated of the possibility that Trump's sweeping higher tariffs could make inflation much worse. Fed officials have said they want to see more fresh data about inflation before moving. On Thursday, a report will show how bad inflation was at the wholesale level across the United States. Economists expect it to show inflation accelerated a touch to 2.4% in July from 2.3% in June.
