©Reuters. A board displays stock information at a brokerage office in Beijing, China, January 2, 2020. REUTERS/Jason Lee
2/2
By Herbert Lash and Amanda Cooper
NEW YORK/LONDON (Reuters) – Yields on short-dated Treasury bonds rose and an index of global stocks hovered near two-year highs on Tuesday, after robust U.S. labor market data underlined yet another once a resilient economy and have questioned how soon the Federal Reserve will cut interest rates. .
Gold prices rose to two-week highs on a easing dollar and falling long-term Treasury bond yields as investors await the Fed’s outlook on rates and the economy when the U.S. central bank concludes its first political meeting of 2024 on Wednesday.
Futures traders sharply raised the probability of a missed rate cut in March to 58.3% from 52.9% on Monday, according to CME Group’s (NASDAQ:) FedWatch Tool, a reversal from just 11.5% at the end of 2023 which the Fed would maintain. its target rate at 5.25%-5.50%.
“If you’re the Fed and you’re faced with this reality of, ‘OK, labor is still in pretty solid shape,’ maybe we don’t need to cut right away. That’s what the debate will be about within the Fed. Fed.” now,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income in Newark, New Jersey.
The two-year Treasury bond yield, which reflects interest rate expectations, rose 3.7 basis points to 4.359% after a Labor Department report showed U.S. job opportunities increased unexpectedly in December and the previous month was revised upwards.
But what caught Porcelli’s attention was the so-called labor market differential in a Conference Board report based on respondents’ opinions on whether jobs are plentiful or hard to get, which increased to 35, 7 this month from December 27.3.
“This labor differential aligns incredibly well with the unemployment rate,” Porcelli said. “Not only has it improved a lot, but it has improved after what had been a two-year downturn.”
Benchmark 10-year bond yields rebounded after the jobs data, then fell. The latest was down 3.4 basis points at 4.057%.
US stocks were mixed due to strong economic data and its impact on rates, along with concerns about the lack of earnings from one of the Magnificent Seven companies: Alphabet (NASDAQ:), Amazon (NASDAQ:), Apple (NASDAQ:), Meta (NASDAQ:), Microsoft (NASDAQ:), NVIDIA (NASDAQ:) and Tesla (NASDAQ:) – could push stock prices lower.
“The real issue right now is earnings. We’re in the heart of earnings season and there are big companies reporting after the close, Google and Microsoft,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
“There’s nervousness out there that one of these companies might not notice, and it could bring down not only that company, but maybe some of the others as well,” Ghriskey added.
As US markets opened, the MSCI world index performed poorly, down 0.02%, after trading in positive territory at its highest since January 2022.
The rise of 0.34%, the fall of 0.03% and the fall of 0.73%. In Europe, the pan-regional index closed 0.16% higher after earlier hitting a new two-year high.
Earlier in Asia, regional stocks had fallen on growing concerns about China’s real estate sector after China Evergrande The liquidation of (HK:) was ordered on Monday.
The dollar fell against the euro and higher against the yen, but failed to find strong direction before the conclusion of the Fed’s policy meeting and Chairman Jerome Powell’s press conference.
The , a gauge of the U.S. currency against six others, fell 0.048%, while the euro rose 0.1% to $1.0844. The yen weakened 0.07% to 147.63 per dollar.
However, markets remained nervous as tensions in the Middle East remained above $80 a barrel
Other risk events this week for investors include the Bank of England’s rate decisions and US employment data for January on Friday.
Oil prices recovered from earlier losses, kept in check by supply concerns driven by rising tensions in the Middle East.
futures settled at $1.04 at $7.82 a barrel and Brent rose 47 cents to settle at $82.87 a barrel.
The United States settled 0.3% higher at $2,050.90 an ounce.