Risk demand dominates global markets ahead of the weekend
Wall Street stocks advanced on Thursday as Treasury yields retreated along with the dollar. The Dow Jones added 1.7% to see its best session since June. The S&P 500 gained 1.89% to post back-to-back gains of more than 1% for the first time since in eight months. The Nasdaq Composite climbed 1.78%. On a weekly basis, the S&P 500 is up nearly 5%, the Dow is up 4.4%, and the Nasdaq is on pace for a add more than 5%. On the data front, labor costs unexpectedly dropped in the third quarter while weekly jobless claims rose to 217,000.
Following suit, Asian shares rallied on expectations that interest rate hikes are coming to an end. China’s Shanghai Composite edged 0.71% higher after a services industry survey showed a slight improvement last month. On the negative side, Chinese retail sales hit its lowest level in ten months. Hong Kong’s Hang Seng rallied 2.46%, Australia’s S&P/ASX 200 gained 1.14% after data showed that retail sales unexpectedly grew in the third quarter. South Korea’s Kospi surged 1.08%. Japanese markets were closed for a holiday.
In Europe, stock markets opened higher Friday, with the Stoxx 600 index heading for its best week-on-week performance since the end of March as regional government bond yields retreated after the Fed left rates unchanged and investors raised bets that rate cuts are on the horizon. In the UK, the Bank of England held rates for a second consecutive meeting while Bailey said interest rates would have to be held in restrictive territory for some time. US stock index futures look mixed in early pre-market deals, suggesting risk demand could wane ahead of the weekend.
In other markets, the US dollar keeps retreating since Thursday along with yields. The 10-year Treasury yield dropped by about 12 basis points to 4.668% after topping 5% last month. The USD index has settled around the 106.00 figure after peaking just above the 107.00 mark earlier in the week. A failure to confirm a break above this barrier triggered some profit-taking. Still, the greenback remains relatively strong and elevated despite a dovish message from the Fed. On the downside, the immediate support now arrives around 105.80, followed by the 105.50 region.