Stocks rise, bonds and bitcoin regain some footing

NEW YORK/LONDON – Global shares rose on Tuesday and both cryptocurrencies and global government bonds stabilized after the previous day’s selloff, which was triggered by a looming interest rate hike in Japan.

Investors are also gearing up for an expected interest rate cut by the US Federal Reserve.

Wall Street stocks finished higher after losing ground in the prior session. Technology and industrial shares drove the gains, while energy and materials led losses.

The Dow Jones Industrial Average rose 0.39%, the S&P 500 rose 0.25% and the Nasdaq Composite rose 0.59%.

The broad stock indexes in Europe ended marginally higher by 0.07% while Asia-ex Japan gained 0.47%.

“A simple way to think about this is from the lens of inflation, monetary policy, and fundamentals,” said Talley Leger, chief market strategist at The Wealth Consulting Group.

“On the inflation side, I’m not so concerned because it’s below average back to the early 1900s and I think that in turn gives the Fed scope to keep cutting rates, which is the market expectation being priced in now. You can add to that strong fundamentals in the form of record holiday shopping and strong (corporate) earnings,” Leger added.

Data on Monday supported expectations for a December rate cut by the Fed, with manufacturing contracting for a ninth straight month in November, although consumers beat analyst expectations with a USD 23.6 billion online shopping spree to kick off the holiday season.

The MSCI World index of stocks across the globe rose 0.21%.

Markets are pricing in an 87.2% probability of a 25 basis-point interest rate cut at the Fed’s meeting next week, according to CME’s FedWatch tool.

“There’s a little bit of momentum behind a cut, but I think it’s what they say in the press conference about the neutral rate that a lot of people will be focused on,” said James St Aubin, chief investment officer at Ocean Park Asset Management.

JAPAN BOND SELLOFF

Jitters in the Japanese government bond market were soothed by a strong auction result, boosting the global mood. Bond yields move inversely to prices, and a weeks-long tumble in JGB prices on concerns about the nation’s finances and expected rate hikes by the Bank of Japan had sent Japan’s 10-year yields to a 17-year peak and 30-year yields to an all-time high.

On Tuesday, global bonds again took their cue from JGBs, but this time echoed their calm: The US 10-year Treasury yield was at 4.087% and the benchmark 10-year German yield was at 2.752%, both down marginally on the day.

In currency markets, the Japanese yen softened, with the dollar up 0.29% at 155.87 yen.

The dollar was also steady more broadly on Tuesday, after softness on Monday helped to hoist the euro briefly above USD 1.165. The common currency last traded down 0.1% at USD 1.1622.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.08% to 99.36, on track for an eighth straight session of losses.

Gold retreated 0.57% to USD 4,208.53 an ounce. Spot silver was last up 0.94% at USD 58.50, trading just below its record high of USD 58.83 hit on Monday

Oil prices fell slightly as traders weighed up risks from Ukrainian drone strikes on Russian energy sites and concerns about oversupply. Brent crude futures settled down 1.14% at USD 62.45 a barrel. US crude futures fell 1.15% to settle at USD 58.64 a barrel.

Bitcoin, which some investors see as a possible leading indicator for risk assets, inched higher on Tuesday after slumping on Monday. It gained 5.55% to USD 91,256.76.

(Reporting by Chibuike Oguh in New York; Editing by Shri Navaratnam, Alex Richardson, Aidan Lewis, Deepa Babington, and Edmund Klamann)