Global stocks set for best week in a year

Global stocks were on track for their biggest weekly rise in a year on Friday as investors cheered a pause in US interest rate hikes, while the dollar was on the back foot.

Trading on Friday was relatively subdued, however, as investors awaited key US employment data later in the day.

The MSCI World stock index has risen 4.3% since Monday, which would be the largest weekly rise since November 2022. The index was up 0.23% on the day.

Europe’s benchmark Stoxx 600 equity index was 0.16% higher on Friday and was set for a weekly increase of 3.4%, its biggest since March. Germany’s DAX was 0.18% higher and Britain’s FTSE 100 rose by the same amount.

The rally in stocks came as bond yields tumbled after the Fed left interest rates steady for a second meeting running on Wednesday and the Bank of England followed suit on Thursday.

Central bank officials stressed that more may need to be done to tackle inflation, but many investors believe the next move in borrowing costs is likely to be down.

“What you hear from basically all the major central banks over the last week..., in their mind I think they’re all on hold,” said Samuel Zief, head of global FX strategy at JPMorgan Private Bank. The European Central Bank held rates last week. 

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“Once the market can become convinced that all these central banks are on hold..., that can encourage bond yields to move lower.”

The 10-year US Treasury yield, the reference for borrowing rates around the world, dropped 20 basis points (bps) over Wednesday and Thursday and is now down around 36 bps since touching a 16-year high above 5% last week.
The yield, which moves inversely to the price, was unchanged at 4.666% on Friday.

A decision on Wednesday by the US Treasury to issue less long-term debt than expected also fuelled the rally in bonds, as did data on Thursday suggesting the US economy might finally be cooling.

The dollar index was down 0.16% at 106.03 on Friday and on track to fall 0.49% across the week, dragged lower by US yields. The euro was up 0.15% at $1.064 and set for a 0.69% weekly gain.

US S&P 500 stock index futures were 0.2% lower on Friday, pointing to a slight fall at the open after the index jumped 1.9% the previous day.

Apple’s Frankfurt-listed shares fell 2.3% after it delivered a sales forecast for the holiday quarter that missed Wall Street expectations. It was down around 3% in pre-market US trading.

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Investor focus on Friday turned to the US nonfarm payrolls data due at 1230 GMT. Economists expect the US economy added 180,000 jobs in October, after the blockbuster 336,000 increase in September.

Goldman Sachs chief economist Jan Hatzius wrote in a note to clients that the bank expects payrolls rose by 195,000, despite a 30,000-job drag from the autoworker strikes.

“We believe tight labor markets incentivise firms to frontload autumn and pre-holiday hiring,” he said.

Oil prices were down for the week, in part because the Israel-Hamas war has not widened as some feared.
Brent crude oil futures were 3.8% lower since Monday at $87.04 a barrel, while US crude traded at $82.67 a barrel, although both were up slightly on Friday.

Goldman Sachs chief economist Jan Hatzius wrote in a note to clients that the bank expects payrolls rose by 195,000, despite a 30,000-job drag from the autoworker strikes.