Wayne Cole and Amanda Cooper
SYDNEY/LONDON (Reuters) – Global stocks rose on Monday ahead of a week filled with U.S. economic data that will be crucial in determining interest rate expectations, although heightened political uncertainty curbed any New Year enthusiasm.
In China, the yuan hit a 16-month low and blue-chip stocks traded at their weakest since late September, prompting stock exchanges and the country’s central bank to defend falling markets and calm investor concerns about the impact on the world’s second-largest economy. about Donald Trump’s imminent return to the White House.
Meanwhile, reports emerged Monday that embattled Canadian Prime Minister Justin Trudeau could announce his resignation later in the day.
Markets appeared to have taken this into account and could welcome an election to clear the air, sending the US dollar down 0.4% to 1.4393 against its Canadian counterpart.
The MSCI All-World index rose 0.1%, reflecting a somewhat mixed performance in Europe, where it rose 0.1%, while the best-performing main European index for 2024 rose 0.2%.
US stock index futures rose 0.1-0.3%, indicating a continuation of Friday’s rally in the major indices.
“We start a new trading week and a new trading year with stocks enjoying a strong rally on Friday that erased any declines seen the day before. , with S&P volumes about 20% below its 20-day average,” said Pepperstone senior research strategist Michael Brown.
Caution increased ahead of Friday’s U.S. December jobs report, in which analysts expect nonfarm payrolls to increase by 150,000 and unemployment to remain at 4.2%.
They will be preceded by data on ADP hiring, job openings and weekly unemployment claims, as well as surveys on manufacturing, services and consumer sentiment.
Any optimistic outlook would bolster the case for smaller rate cuts from the Federal Reserve, and markets have already lowered expectations to 40 basis points for 2025.
Investors will also have a chance to get some insight into Fed officials’ thinking this week, thanks to minutes from the central bank’s latest meeting on Wednesday and appearances from a number of top policymakers, including powerful Fed Chairman Christopher Waller, who is also scheduled to speak.
Inflation data from Germany on Monday and the eurozone on Tuesday could help clarify prospects for further rate cuts by the European Central Bank. Traders now expect the ECB to cut rates by a quarter point four times this year.
YIELD IS INCREASING
In the bond sector, U.S. Treasury yields rose for a second day to 4.624%, within a hair’s breadth of last week’s eight-month high of 4.641%. Yields rose nearly 80 basis points in the fourth quarter, with yields rising more than 30 basis points in December alone.
Investors’ appetites will be tested this week by the sale of $119 billion in new three-, 10- and 3-year Treasuries.
“The key level to watch in US 10-year bonds remains the May 2024 high at 4.64%, a break above which could signal a rise to 4.75%,” Saxo Bank analysts said.
High yields provided the dollar with a natural source of support. The index, which rose 0.9% last week, fell 0.3% on Monday, mainly due to gains in the euro and sterling.
The euro was up 0.25% on the day at $1.03365, just above resistance near $1.0340, while the pound retreated slightly after hitting eight-month lows last week to trade up 0.4% at $1.2472.
Monday’s domestic session ended at 7.3296 per dollar, the lowest since September 2023.
Oil found support from colder weather in Europe and the United States, and a winter storm brought snow, ice and sub-zero temperatures to a wide swath of the US on Sunday.
But early gains faded and fell 0.4% to $76.22 a barrel, while European prices fell 1% to €49.10 per megawatt-hour (MWh), close to a 14-month high. .