Bets that the central bank will enact a smaller rate hike in December are growing
Wall Street stocks saw the third bullish session in a row on Tuesday as risk demand persisted amid the ongoing retreat in Treasury yields. The yield on the benchmark 10-year Treasury note slipped by around 15 basis points to 4.087%. The Dow Jones Industrial Average closed 1.1% higher, the S&P 500 advanced 1.6%, and the Nasdaq Composite rallied 2.2%. On the data front, the S&P Case-Shiller index showed home prices fell 1.3% in August, but were still 13.1% higher than a year ago. In individual stocks, General Motors rose 3.6% after reporting stronger-than-forecasted earnings.
Today in Asia, most equities extended gains on Wednesday amid Fed pivot hopes as bets that the central bank will enact a smaller rate hike in December are growing. Recovering from a sharp sell-off earlier in the week, Chinese stocks were leading the gains for the session. Meanwhile, Australian markets lagged as inflation in the country reached a 32-year high, signaling more economic issues.
European stock markets opened marginally lower, however, as risk demand started to wane, with softer mood mirroring the retreat in US stock index futures. In part, this is due to disappointing miss on earnings by Alphabet, while Microsoft revealed weak guidance in its report. Of note, Nasdaq futures are down nearly 2% on the day already despite the sliding dollar. Investors will be looking ahead to Thursday’s ECB meeting, at which it is widely expected to raise rates by 75 basis points.
In currencies, the safe-haven greenback stays pressured these days. The USD index derailed the 111.00 mark to fins support around 110.75 in early European deals. A failure to hold above this support zone would pave the way towards October lows seen around 110.00. However, the broader uptrend remains intact, and the buying pressure could reemerge as risk demand remains fragile at this stage. On the upside, the immediate resistance now arrives around 111.15, followed by the 111.50 zone.