- Global equities rose and shrugged off a more hawkish outlook for US interest rates, which strengthened the dollar.
- The euro hit its 17-month lowest level under pressure from a COVID-19 rise in Europe and the dollar’s attractiveness to return-seeking investors.
- The US markets were closed due to the Thanksgiving holiday.
Global equities rose on Thursday, shaking off the prospect of faster Federal Reserve rate hikes, although trading was easy given the US Thanksgiving Day holiday.
Meanwhile, the euro fell to its lowest level in 17 months against the dollar under pressure as cases of COVID-19 broke out across Europe.
U.S. stock futures traded higher, with markets closing Thursday due to the holiday and closing early Friday. The S&P 500 and Dow Jones futures rose 0.2% each, while the Nasdaq 100 futures rose 0.1%. More generally, the MSCI All-World Index rose 0.1 percent.
The minutes of the Fed’s most recent meeting, released on Wednesday, suggested that politicians are becoming concerned about the long-term effects of inflation, which is running at the fastest pace in 30 years.
Markets show that investors are now pricing two rate hikes in 2022 instead of one, as had been the case just a few weeks ago.
Two-year government interest rates have tripled in two months, while the dollar has risen against virtually all major currencies so far this year. The more expensive parts of the stock market, such as technology stocks, have tended to come under greater pressure. But with interest rates still close to the bottom, there have been no long-term divestments.
“The ‘selling winners’ theme continued yesterday, with the technology sector once again making losses. Despite this, the market remains within 2% of its record high ever, and it remains difficult to find and outline a convincing bearish argument,” Caxton said. currency strategist Michael Brown in a daily note.
“Meanwhile, the dollar continued its march higher yesterday, benefiting from a significant rise in front-end interest rates, including the 2-year hitting new cycle highs,” he said.
The euro slipped to its lowest against the dollar since June 2020 and was last up 0.2% to $ 1.1221. The movement was driven in part by the explosion in COVID-19 cases in Europe and the consequent activity restrictions, as well as investors dropping low-yielding currencies such as the yen and the Swiss franc. The euro has lost around 8% this year and was last up 0.2% against the dollar.
Europe has once again become the epicenter of coronavirus infections. Cases have broken records in parts of the region, and a number of countries, including Austria, the Netherlands and Sweden, have imposed restrictions.
The stock markets in the region were relatively undisturbed, boosted by the weakness of the euro. The pan-continental Stoxx 600 rose 0.45%, led by gains in defensive stocks such as utilities and healthcare.
But the rise has taken a toll on the indices of the countries hardest hit by the recent outbreak. Frankfurt’s DAX and Amsterdam’s AEX are among the worst performing in the past week with declines of 1.8% and 2% respectively. Meanwhile, Vienna’s ATX has lost 1.4% compared to a 0.5% increase for London’s FTSE 100.
In Asia, the major benchmark indices came under pressure from rising expectations to a faster US interest rate rise. It tends to weigh on emerging markets as investors can secure higher returns in dollar-based assets.
Seoul’s KOSPI lost 0.8% after the Bank of Korea raised interest rates, while Shanghai Composite fell 0.2%. Tokyo’s Nikkei rose 0.7%, making it one of the best-performing indices in the region, thanks to the yen – which tends to trade upside down against equities – which drops to almost five years’ lowest level against the dollar .
Oil slipped back as the U.S. prepared to release some of its strategic crude oil stocks to dampen this year’s sharp rises in the price of gasoline, fuel oil and other refined products. Brent oil and WTI both fell 0.5% to $ 81.88 per share, respectively. barrel and $ 77.97.