Dollar down further on rates speculation

The dollar extended a decline, with a gauge of greenback strength hitting its lowest level since August, amid speculation the Federal Reserve is nearing the end of its rate-hike cycle.

Traders are currently pricing in about a 30% chance of a first Fed rate cut in March following cool inflation data last week. Investors are awaiting publication Tuesday week of minutes of the last Fed rates meeting for further insight into policy makers’ thinking.

“The dovish Fed narrative remains in place,” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. “There is likely to be ongoing downward pressure on US yields and the dollar.”

U.S. equity futures were steady after a three-week stock rally that propelled the S&P 500 to an 11-week high. Microsoft Corp. climbed more than 2% in pre-market trading after appointing Sam Altman, the OpenAI co-founder ousted from his startup last week, to lead its in-house artificial intelligence team. Treasury yields edged higher ahead of a U.S. 20-year auction.

The Stoxx Europe 600 index fluctuated as a slew of negative corporate news weighed on shares.

Bayer AG slumped more than 10% after the German pharmaceutical giant stopped a key drug trial and suffered a defeat in a trial related to its Roundup weed killer. Ashtead Group Plc plunged after the UK equipment-rental company cut its revenue forecasts. Julius Baer Group Ltd. fell as much as 9.6% after the Swiss bank warned of a profit decline amid rising bad-loan provisions.

MOODY'S LIFTS ITALY

Italian banks rallied after Moody’s Investors Service lifted its outlook on the country’s debt to stable, removing the immediate threat of a downgrade to junk. Italy’s yield premium over German bonds narrowed.

Meanwhile, European natural gas prices jumped after a vessel seized in the Red Sea by Iran-backed Houthi rebels renewed concerns that the Israel-Hamas war could affect vital waterways for the fuel. Benchmark futures increased as much as 6.9% on Monday, halting a four-day run of declines. The increase was also driven by colder weather forecasts and higher crude oil prices ahead of an OPEC+ meeting later this week.

The European Central Bank may have to raise borrowing costs again if investor bets on monetary loosening undermine the institution’s policy stance, Governing Council member Pierre Wunsch said on Monday. He was the first of a number of ECB officials set to speak Monday and later this week. 

In Argentina, libertarian candidate Javier Milei defeated Economy Minister Sergio Massa to win Sunday’s presidential runoff. Argentina’s bonds rallied, while a gauge of emerging-market currencies gained along with developing-nation stocks.

Elsewhere in emerging markets, Zambia’s eurobonds plunged after the country said it can’t implement a restructuring pact with bondholders as not all creditors supported the agreement. Securities due 2027 fell more than 2 cents in the dollar.

The offshore yuan strengthened after the People’s Bank of China boosted its daily reference rate for the currency to the strongest since August. The nation’s commercial lenders on Monday kept their benchmark lending rates unchanged, in line with the central bank’s decision this month to maintain policy rates in favor of other means to support stimulus spending. 

Japan’s Nikkei 225 Stock Average briefly surpassed its June intraday peak to reach the highest level since 1990, extending its gains this year to about 28%. The index has been boosted by recent yen weakness, solid company earnings, and corporate governance reforms. Key events this week: 

• European Central Bank governing council members Pablo Hernandez de Cos, Francois Villeroy de Galhau, Boris Vujcic speak at separate events, Monday
• Bank of England Governor Andrew Bailey speaks, Monday
• US Conference Board leading index, Monday
• European Central Bank President Christine Lagarde speaks, Tuesday
• Canada CPI, Tuesday
• Federal Reserve Nov. policy meeting minutes, Tuesday
• Nvidia earnings, Tuesday
• Eurozone consumer confidence, Wednesday
• US initial jobless claims, University of Michigan consumer sentiment, durable goods, Wednesday
• Eurozone PMIs, Thursday
• UK S&P Global/CIPS Manufacturing PMI, Thursday
• European Central Bank publishes account of Oct. policy meeting, Thursday
• Thanksgiving holiday in the US, Thursday
• Japan CPI, Friday
• Germany GDP, Friday
• US manufacturing PMI, Friday
• Black Friday sales begin, Friday

Some of the main moves in markets: 

Stocks

• The Stoxx Europe 600 was little changed as of 9:26 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index rose 0.6%
• The MSCI Emerging Markets Index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.2% to $1.0933
• The Japanese yen rose 0.8% to 148.45 per dollar
• The offshore yuan rose 0.6% to 7.1729 per dollar
• The British pound rose 0.2% to $1.2484

Cryptocurrencies

• Bitcoin rose 0.5% to $37,194.25
• Ether rose 2.1% to $2,024.48

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.46%
• Germany’s 10-year yield advanced one basis point to 2.60%
• Britain’s 10-year yield advanced one basis point to 4.12%

Commodities

• Brent crude rose 0.5% to $81 a barrel
• Spot gold fell 0.1% to $1,978.67 an ounce