European stocks continue global year-end rally: Markets wrap

(Bloomberg) — European stocks continued the rally seen in Asian markets and Wall Street, as investors brace for interest rate cuts from the Federal Reserve next year. Gold was trading near the record high it hit earlier this month.

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The Stoxx Europe 600 index rose 0.3% after the Asian stock index rose for the fourth consecutive session. The European index is at its highest level since January 2022 after adding 13% this year. US stock futures also pointed to an extension of Wednesday's gains on Wall Street.

Bonds stabilized after strong gains on Wednesday, which saw the yield on five- to 30-year Treasuries fall by at least 10 basis points, and the German 10-year yield hit a new low in 2023. The gains pushed a global measure of the bond market to the cusp of… Its best rise ever in two months.

Vishnu Varathan, head of economics and strategy at Mizuho Bank Limited in Singapore, said expectations of monetary policy easing are coming to the fore. “The ferocity of the bond market rally has actually increased total returns for investors – there is a sense that markets are signaling that we are halfway to easy monetary policy again,” he said.

Gains in Asia were led by Chinese stocks, which are on track for their best day in four months, supported by a rotation in some of the worst-performing sectors in 2023. Stocks in Hong Kong, India and Australia also rose.

A gauge of global stocks is headed toward its highest close since February 2022, up more than 15% from its October low, reflecting traders' optimism for interest rate cuts next year. Traders ramped up their bets on federal interest rate cuts early in March, according to Fed swaps pricing. Jobs data due later on Thursday may give more clarity on the outlook for the economy and interest rates.

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Gains in bonds were helped by abundant demand for five-year Treasuries on Wednesday, which followed strong appetite for a two-year auction the day before. The strong appetite for securities is a sign that investors want to secure attractive returns ahead of expected cuts from the Federal Reserve. The dollar fell against all of its G10 peers, with the US currency gauge heading for a fifth day of declines.

In Asia, the yen rose for a second day after Bank of Japan Governor Kazuo Ueda continued to pave the way for the country's first interest rate increase since 2007.

China's CSI 300 index is headed for its first weekly gain since early November, with technology and renewable energy stocks contributing the most to the rise on Thursday.

Gold approached a record level, while oil stabilized amid signs of building US inventories. Bitcoin rose, trading above $43,000 amid renewed speculation that the U.S. Securities and Exchange Commission is close to approving an exchange-traded fund that invests directly in the largest token.

Main events this week:

• US Wholesale Inventories, Initial Jobless Claims, Thursday

• House prices nationwide in the UK, Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was up 0.3% as of 8:09 a.m. London time

• S&P 500 futures rose 0.1%

• Nasdaq 100 futures rose 0.2%

• Dow Jones Industrial Average futures were little changed

• The MSCI Asia Pacific Stock Index rose 1.3%.

• MSCI Emerging Markets Index rises 1.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%.

• There was little change in the euro at $1.1115

• The Japanese yen rose 0.7% to 140.80 per dollar

• The yuan in external transactions rose 0.6 percent to 7.1063 per dollar

• The British pound rose 0.1 percent to $1.2813

Digital currencies

• Bitcoin fell 0.9% to $42,994.18

• Ethereum rose 0.5% to $2,373.74

Bonds

• The yield on 10-year Treasury bonds rose one basis point to 3.81%.

• The yield on 10-year German bonds rose one basis point to 1.91%.

• The yield on British 10-year bonds rose two basis points to 3.46%.

Goods

• There was little change in Brent crude

• Gold in spot transactions rose 0.3 percent to $2,084.52 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Ruth Carson and Richard Henderson.

(A previous version corrected the first paragraph to show gold trading near a record level)

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