Shares struggle after Wall Street wobble, bonds roar on

[December 21, 2023]  By Marc Jones

LONDON (Reuters) - Share markets had an end of year wobble on Thursday, while bonds completed a remarkable round trip for the year on the consensus view that large parts of the world will be chopping interest rates in 2024.

Wall Street had suffered its biggest drop since September on Wednesday. There was no obvious catalyst but with holidays fast approaching and a final dump of U.S. data due later neither Asia no Europe offered much resistance.

Europe's STOXX 600 index fell 0.4% early on in a broad market selloff where the region's car sector skidded 1% and both tech and travel slipped 0.5%.

Commerzbank brought some timely cheer as it shares jumped nearly 3% after the European Central Bank approved its 600 million euros ($656.88 million) stock buyback plan. [.EU]

U.S. futures were also pointing higher again after Wednesday's 1.3%-1.5% Wall Street whackings and [.N] bond markets were still rallying too.

Italy's 10-year bond yields - which reflect Rome's borrowing costs - fell to their lowest since August 2022 while benchmark 10-year Treasuries were down at 3.86%, which was almost exactly where they started the year. [GBD/EUR]

It completes a remarkable round trip after they touched 5% back in October when investors where expecting a higher-for-longer Fed. It highlights how the opposite is now priced in, BofA strategist Elyas Galou said.

"Everyone expects a soft landing to happen, everyone expects bond yields to be lower and everyone expects Fed rate cuts," he said.

In the currency markets, the yen rose as far as 142.81 per dollar after Japan lifted its growth projections for the fiscal year to 1.6%.

The dollar index, which tracks the US currency against a basket of other top currencies, barely budged and Britain's pound steadied after weaker-than-expected UK inflation numbers had sparked its biggest drop since October on Wednesday.

The euro was at a standstill too, with the debate still raging on when the ECB might start cutting euro zone interest rates. [/FRX]

A man walks past an electric monitor displaying Japan's Nikkei share average and recent movements, outside a bank in Tokyo, Japan, June 5, 2023. REUTERS/Issei Kato/File Photo

"Once we see inflation is clearly converging in a stable manner to our target of 2%, monetary policy might then start to ease. But it's still too early for that to happen," ECB Vice President Luis de Guindos told Spanish newspaper 20 Minutos in an interview published on Thursday.

TIME FOR TURKEY

The year's last dump of U.S. data is due later in the form of the final estimates of U.S. third-quarter GDP and the weekly jobless claims report.

Turkey is on the menu too. Its central bank is expected to hike interest rates another 250 basis points which would take them to 42.5% and continue its return to the tried and tested methods for tackling inflation problems.

In commodities, global oil benchmark Brent hovered around $80 a barrel amid jitters over global trade disruptions and geopolitical tensions in the Middle East following attacks on ships in the Red Sea by Yemen's Iran-aligned Houthi forces.

Brent crude was last trading at $79.93 per barrel and U.S. crude ticked up to $74.45 a barrel.

In Asia overnight, Japan's Nikkei stock index slid 1.5% from long-term highs, while China's blue-chips rose 1.25%, rebounding from a near five-year low hit in the previous session.

Gold, which is up almost 12% this year was slightly higher too at $2036.19 per ounce. [GOL/]

(Reporting by Marc Jones. Editing by Jane Merriman)

[© 2023 Thomson Reuters. All rights reserved.]
This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.