Stock market shares

Central banks, stop rising rates. The markets say so today

A clear message is coming from the markets today: central banks have now finished increasing interest rates and the only option, before seeing cuts in the cost of money, is "higher, for longer".
In detail, stocks in the Asia-Pacific area gained ground after bets strengthened that the maximum level of interest rates has now been reached globally, pushing bond yields lower.
Benchmark 10-year Japanese government bond yields fell to their lowest since mid-August at 0.62%, tracking an overnight decline for equivalent U.S.
Treasury yields.
Additionally, cooling labor market data has solidified the view that the Federal Reserve is done raising the cost of borrowing.
Same sentiment in Europe, where the words of the ECB "hawk" Schnabel have strengthened the idea that the ECB's aggressive monetary policy is coming to an end.
So far, markets and central bankers' opinions have been quite distant, with investors confident in an end to rate hikes and Fed and ECB officials much more cautious.
read also The ECB has really finished raising rates, here's why Why markets are betting on the end of rate hikes today European stocks are set for a bullish start to the day if they follow the example of the Asia-Pacific, supported by a decline in bond yields and growing confidence that the tightening cycle of the main central banks has now reached its peak.
Even in the USA the same climate is felt.
U.S.
stock futures rose after a further labor market slowdown strengthened speculation that the Federal Reserve will cut interest rates next year to avoid a recession.
U.S.
10-year Treasuries hit a three-month low with yields at 4.163% on Tuesday before recovering slightly to 4.195% in the latest session.
According to CME Group's FedWatch tool, bets on a first Fed cut by March now stand at about 64%.
Expectations of lower financing costs boosted stock markets, where technology stocks benefited more than others.
read also Why are the markets "against" the Fed and the ECB? Overnight, US employment data was weaker than expected.
A good performance on the services sector also added to the narrative of a soft landing for the economy as the Fed is about to change its strategy with monetary easing, according to analysts.
With markets all but certain that a Fed rate cut is now imminent, dovish rhetoric from European Central Bank officials and the Reserve Bank of Australia's decision to keep policy stable on Tuesday have fueled bets that global rates will no longer they will rise more.
The Bank of Canada is also expected to take a breather and leave rates unchanged.
In this context, the next Fed and ECB meetings – on 13 and 14 December respectively – are awaited more than ever.

Author: A.W.M.

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