LDN - Business

European stocks climb as yen slumps to one-year low

[November 13, 2023] By Nell Mackenzie and Kevin Buckland

LONDON/TOKYO (Reuters) -European stocks started on a strong footing on Monday after Wall Street's positive close on Friday, with focus turning to U.S. inflation data for more clues on whether interest rates have peaked.

MSCI's gauge of global equities rose 0.2% to a four-week high of 667.7 and the pan-European STOXX 600 index gained 0.8%.

"With less hawkish remarks from European and British central bankers in the past few days, there's a hope that we might be near peak rate hikes," said Russ Mould, investment director at AJ Bell.

"Here in the UK, it looks like markets almost believe they'll dodge recession, the currency won't collapse and the worst expectations won't come to be," he added.

The UK's blue chip stock index, led the region's modest set of stock index gains by ticking up 0.8% by 0930 GMT.

Elsewhere, an edge up in U.S. Treasury yields helped send the dollar to a fresh one-year high against the yen, while scuppering an early tech-led equity rally.

Benchmark 10-year Treasury yields pushed to a one-week high of 4.668% during the Asian trading day, testing the top of their recent range since soft non-farm payroll figures at the start of the month stoked bets for earlier Federal Reserve rate cuts. They have since recovered to 4.632%.

The dollar hit 151.78 yen for the first time since mid-October last year, despite being stable against the euro and sterling and was still hovering at 151.70 near those highs at 0930 GMT.

Japan's Nikkei gave up early gains of more than 1% to end the day almost flat.

U.S. equity futures also pointed 0.20% lower, following Friday's 1.56% rally for the S&P 500.

Nomura Securities strategist Naka Matsuzawa said equities are likely close to a peak.

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The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 8, 2023. REUTERS/Staff/File Photo

"Up until now, the market has been taking bad economic news as good news, because that would mean a pause in Fed rate hikes," he said.

"But now, the Treasury market has already priced in a pause, so there's not much room for Treasury yields to fall further," removing a support for the stock market, he added. "In short, I don't think the stock market rally is going to continue."

The week is packed with big risk events, from consumer inflation and retail sales figures from the United States on Tuesday and Wednesday, respectively. Chinese retail sales are also due Wednesday, following lacklustre sales growth at the annual Singles Day shopping festival over the weekend.

The marquee geopolitical event is also mid-week, with a meeting between U.S. President Joe Biden and Chinese leader Xi Jinping on the sidelines of an Asia-Pacific Economic Cooperation (APEC) summit in San Francisco.

Investors, however, paid little attention to a Moody's announcement late on Friday that it had lowered its outlook on the U.S. credit rating to "negative" from "stable".

Crude oil prices eased on Monday as demand worries trumped supply concerns, amid slowing growth in the United States and China. [O/R]

Brent crude futures for January and U.S. West Texas Intermediate (WTI) crude futures for December edged lower, both down about 5 cents at $81.37 and $77.13 a barrel.

Both benchmarks gained nearly 2% on Friday as Iraq voiced support for oil cuts by OPEC+.

(Reporting by Nell Mackenzie and Kevin Buckland; Editing by Jacqueline Wong)

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