Stocks and bonds take heart from Powell; commodities on a roll
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[April 04, 2024] By
Amanda Cooper
LONDON (Reuters) -Global shares rallied on Thursday as U.S. rate cuts
remained on the table even if their timing was unclear, while the yen
slid against everything except the dollar and gold was pinned near
record highs.
There was also action in industrial commodities as oil traded at
five-month highs and copper reached a 15-month peak, helping to lift
shares in basic materials and energy companies.
Some of these gains were due to supply disruptions and geopolitical
tensions, but they also reflect optimism about global growth given a
recovery in recent factory surveys (PMI), particularly for China.
Sentiment was aided by a reaffirmation from Federal Reserve Chair Jerome
Powell that U.S. rates were still on course to be cut this year, though
the timing was data dependent.
S&P 500 futures rose 0.3% and Nasdaq futures 0.4%, while in Europe, the
STOXX 600 regional index edged into positive territory.
Government bonds, which have witnessed some of their biggest daily
selloffs in months this week, regained some stability on Thursday after
a price rally the day before.
The case for easing was underpinned by a survey of the U.S. services
sector that showed its index of prices paid fell to the lowest since
March 2020, offsetting a worrying rise in the survey of manufacturing
released early this week.
"On Powell, markets generally did gain some reassurance from what he
said, even though there was nothing really new," Philip Shaw, chief
economist at Investec, said.
"That helped, but really the big support to bonds yesterday was the
non-manufacturing ISM that showed the headline index much lower than
expected, the prices paid index dropping to a four-year low, and the
information on supply and delivery times also favourable from an
inflation point of view," he said.
The Institute for Supply Management (ISM) survey outweighed a
surprisingly strong ADP report, which showed private sector jobs rose
184,000.
PAYROLLS IN SIGHT
While this series has a patchy correlation to the official payrolls
report due on Friday, it was strong enough for Goldman Sachs to revise
up its forecast for payrolls by 25,000 to a solid 240,000.
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The German share price index DAX graph is pictured at the stock
exchange in Frankfurt, Germany, April 3, 2024. REUTERS/Staff
Such an outcome would top the median forecast of 200,000 and could
lead markets to again pare the chance of a June rate cut.
Fed fund futures have already lowered the chance of a June move to
62% from 74% a month ago.
Yet the bigger shift has been in how fast and far rates are expected
to fall, with roughly 73 basis points priced in for this year
compared to more than 140 basis points in January.
Investors have also taken 100 basis points of easing out of 2025, so
that rates are now seen ending next year around 4% rather than 3%.
That sea change has left Treasuries under water, with 10-year yields
hitting a four-month high of 4.429% on Wednesday before easing back
a little to 4.367% currently.
As investors have reeled in their bets on how much and how quickly
the Fed might cut rates this year, the dollar has risen across the
board, mostly at the expense of the yen, which is around its weakest
in nearly 35 years.
The risk of Japanese intervention kept the dollar at 151.73 yen, shy
of the 152.00 barrier. Other currencies were not so inhibited, and
the yen fell sharply elsewhere.
The euro was up 0.2% at 164.72, around its highest in 16 years, as
was the Canadian dollar, while the pound was not far from its
highest in nine years.
Gold reached a fresh record at $2,304 an ounce. The price has
climbed 13% since the start of February, driven in part by buying
from momentum funds and commodity trading advisors (CTAs). [GOL/]
Meanwhile oil prices were around their highest in five months,
supported by flaring geopolitical tensions and the threat of a
disruption to supply if the Israel-Hamas war in Gaza spreads to
include Iran. [O/R]
Brent crude eased 0.1% to $89.24 a barrel, but was in sight of
Wednesday's five-month top at $89.99. Three-month copper futures
were last up 0.9% on the day at $9,343 a tonne, having hit their
highest since January 2023.
(Additional reporting by Wayne Cole in Sydney; Editing by Shri
Navaratnam and Jan Harvey)
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