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Bonds Gain Before CPI; French Stocks Near Record: Markets Wrap

(Bloomberg) — Treasury yields and the dollar fell before a crucial US inflation report, while France’s CAC 40 index headed for a record close.

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Global equity markets posted moderate moves, with investors reluctant to make big bets in the buildup to this week’s major risk events. European stocks and US equity futures little changed. Oracle Corp. fell as much as 8.8% in US premarket trading after the software company’s second-quarter revenue disappointed amid slowing cloud sales momentum.

Tuesday’s consumer price index will give Wall Street a sense of whether the disinflation trend is continuing, a day before the last scheduled Federal Reserve decision of 2023. The US central bank is widely expected to hold rates, with most market focus on whether it will try to temper policy easing expectations after investors’ aggressive dovish repricing.

The push by stocks in Paris toward their highest-ever close reflects broader optimism in European markets that central bank policy easing is near. Citigroup Inc. strategist Beata Manthey said the Stoxx 600 benchmark will rise to an all-time high of 510 points by the end of 2024, supported by peaking rates and as companies in the region avoid an earnings recession.

As traders look forward to Thursday’s Bank of England rates decision, figures out Tuesday showed UK wage growth slowed at the sharpest pace in almost two years, a further sign that the labor market is cooling in response to a flagging economy. Monetary policy announcements are also due from the European Central Bank and in Switzerland and Norway that day.

The headline US CPI number for November is forecast to decline to 3.1%, the lowest reading since the June print released in July, which coincided with this year’s lowpoint for the dollar. Core inflation is seen cooling to just below 3% in the first half of next year, according to Bloomberg Economics. Such a scenario would help pivot the Fed to an easing stance.

“Short-term inflation expectations have come down sharply on lower energy prices in recent months,” said Anna Wong and Stuart Paul of Bloomberg Economics. “That makes more room for the Fed to consider rate cuts as downside risks for activity and upside inflation risks become more balanced.”

A gauge of dollar strength slipped 0.2%. Treasuries rose across the curve, with 10-year yields falling three basis points to 4.20%. Bonds also gained in the UK and Germany.

Chinese Policy

In Asia, shares were broadly higher, with Hong Kong’s equity gauges leading gains, as traders await decisions from a meeting of Chinese economic policymakers that may indicate how much stimulus to expect next year. The 2023 Central Economic Work Conference will likely indicate a more proactive role for fiscal policy, including more front-loading of funding and strengthening implementation to improve policy efficacy, according to Bloomberg Economics.

Meanwhile, the yen rebounded from its biggest decline in more than a month Monday that was triggered by a report saying Bank of Japan officials see little need to rush to scrap negative interest rates this month. Japan’s five-year government bond sale drew a higher-than-expected cut-off price, signaling robust demand as speculation eased about the BOJ’s potential exit from its negative interest rate regime.

Elsewhere, oil edged higher as an attack on a tanker in the Red Sea raised fears of disruptions to shipping due to the Israel-Hamas war. Gold ticked higher after falling 1.1% on Monday to trade back below $2,000 an ounce.

Bitcoin rose after posting its steepest drop in almost four months as traders moved to lock in profits following a more than 150% rally this year, triggering large liquidations of bullish bets.

Key events this week:

  • Germany ZEW survey expectations, Tuesday

  • US CPI, Tuesday

  • Eurozone industrial production, Wednesday

  • US PPI, Wednesday

  • Federal Reserve policy meeting and news conference with Chair Jerome Powell, Wednesday

  • European Central Bank policy meeting followed by news conference with ECB President Christine Lagarde, Thursday

  • Bank of England policy meeting, Thursday

  • Swiss National Bank policy meeting, Thursday

  • US initial jobless claims, retail sales, business inventories, Thursday

  • China 1-yr MLF rate and volume, property prices, retail sales, industrial production, jobless rate, Friday

  • Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday

  • US industrial production, Empire manufacturing, cross-border investment, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.1% as of 9:26 a.m. London time

  • S&P 500 futures were little changed

  • Nasdaq 100 futures rose 0.1%

  • Futures on the Dow Jones Industrial Average rose 0.1%

  • The MSCI Asia Pacific Index rose 0.4%

  • The MSCI Emerging Markets Index rose 0.3%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro rose 0.2% to $1.0787

  • The Japanese yen rose 0.4% to 145.57 per dollar

  • The offshore yuan was little changed at 7.1915 per dollar

  • The British pound was little changed at $1.2552

Cryptocurrencies

  • Bitcoin rose 1.9% to $41,944.13

  • Ether rose 0.7% to $2,231.99

Bonds

  • The yield on 10-year Treasuries declined three basis points to 4.20%

  • Germany’s 10-year yield declined three basis points to 2.24%

  • Britain’s 10-year yield declined 10 basis points to 3.98%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, Winnie Hsu and Lynn Thomasson.

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©2023 Bloomberg L.P.

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