In the latest financial developments, the U.S. dollar demonstrated resilience against the yen on Tuesday following the Bank of Japan‘s decision to maintain interest rates. Simultaneously, MSCI’s global stock index experienced an upswing as investors closely monitored the potential for U.S. interest rate cuts in 2024.
The S&P 500 made notable gains, nearing its January 2022 all-time closing high by just one percentage point. MSCI’s worldwide stocks gauge reached its highest level since late March 2022. Oil futures extended previous gains after Yemen’s Iran-aligned Houthi militants launched attacks on ships in the Red Sea, disrupting maritime trade and prompting companies to reroute their vessels.
The yen depreciated after the Bank of Japan retained its ultra-low interest rates and adhered to its dovish policy guidance. This move dashed some traders’ hopes of an imminent end to negative interest rates.
While U.S. Treasury yields experienced a slight dip, they remained above multi-month lows reached the previous week. Investors closely monitored comments from Federal Reserve officials for insights into when the central bank might initiate interest rate cuts.
Despite the dovish tone set by Fed Chair Jerome Powell last week, Atlanta Fed President Raphael Bostic emphasized that there was no “urgency” for rate cuts. Bostic pointed to the robustness of the U.S. economy and the imperative to ensure inflation returns to the 2% target.
Market analyst Chris Zaccarelli noted, “Ever since Powell did a pivot, people have been in a buying mood. The market heard what they wanted to hear from Powell and they’re not really listening to what the rest of the Fed speakers are saying.”
On Wall Street, the Dow Jones Industrial Average rose 0.68%, the S&P 500 gained 0.59%, and the Nasdaq Composite added 0.66%. MSCI’s global index rose 0.63% and has seen a nearly 15% gain since late October.
In the European market, the pan-European STOXX 600 index closed up 0.36% after ECB member Francois Villeroy de Galhau suggested lowering interest rates in 2024. This comes despite ECB President Christina Lagarde’s previous resistance to market expectations of imminent rate cuts.
In the realm of U.S. Treasuries, benchmark 10-year notes saw a slight decrease, and the 30-year bond yield dipped. In currencies, the U.S. dollar strengthened against the yen but softened against other majors, influenced by expectations of interest rate cuts in the coming year.
Oil prices rose amid Red Sea turmoil, with the U.S. announcing a task force to safeguard commerce and Houthi militants vowing to defy the U.S.-led naval mission. U.S. crude settled at $73.44 per barrel, and Brent finished at $79.23.
In precious metals, gold prices firmed as the U.S. dollar and Treasury yields slipped. Investors awaited U.S. economic data for further clarity on the Fed’s interest rate trajectory. Spot gold added 0.6% to $2,039.67 an ounce, while U.S. gold futures gained 0.81% to $2,038.40 an ounce.
