U.S. and Global Markets Rally as Americans Feast and Shop: A Comprehensive Analysis
This week, U.S. Treasuries have experienced a significant rally, countering post-election fiscal worries and impacting world bonds. The rally, fueled by well-behaved U.S. inflation and strong demand during a heavy week of debt sales, has also led to a decrease in the value of the dollar.
The appointment of Wall Street money manager Scott Bessent as treasury Secretary by President-elect Donald Trump has further bolstered the rally. However, concerns about Trump’s trade tariff threats and France’s budget negotiations have cast a shadow over global growth prospects.
Despite the holiday week and month-end position squaring, the drop in borrowing rates has been substantial, with 10-year yields hitting a one-month low and 30-year long bond yields at a six-week low. Inflation expectations have also decreased, with long-term inflation swaps dialing back.
Energy markets have played a role in the rally, with crude prices easing due to a ceasefire in the Middle East. Additionally, U.S. gasoline prices have fallen to their lowest in over three years.
Looking ahead, the U.S. labor market data next week will be crucial in determining the future course of the market. Futures are pricing in a more than 50% chance of the Federal Reserve cutting rates by another quarter point next month.
As Wall Street gears up for the traditional ‘Black Friday’ spending spree, stock benchmarks are on the rise. Inflation trends in Japan and the euro zone are also influencing market movements, with signs of compromise in the French budget row narrowing the spread between French and German government debt yields.
Chinese stocks are outperforming amid hopes for positive news from key business surveys. Key developments to watch for later on Friday include the Chicago November business survey, Canada Q3 GDP revision, a speech by European Central Bank vice president Luis de Guindos, and the publication of the Bank of England’s financial stability report.
Overall, the recent rally in U.S. and global markets, driven by various economic factors and geopolitical events, highlights the interconnected nature of financial markets and the importance of staying informed and prepared for potential market shifts.