The dollar and the euro both took a hit: the greenback suffered due to the Federal Reserve's more dovish stance, while the euro faced challenges amid a significant slowdown in inflation across the European region. The S&P 500 futures were down by 0.2%, while the tech-heavy NASDAQ experienced a 0.3% drop, and the industrial Dow Jones dipped by 0.1%.
The euro and pound also depreciated, and German government bonds saw an increase following weak French data, reinforcing expectations of a potential rate cut in the eurozone next year. The euro weakened by 0.4% against the dollar, and ten-year bond yields fell by four basis points. Despite this, the Stoxx 600 index rose by 0.2%, marking its strongest month since January amidst expectations of a more accommodative policy.
Simultaneously, U.S. Treasuries halted their November rally as traders await signals on the possible timing of a rate cut next year. Treasuries and mortgage-backed debt securities have experienced significant gains due to weakening price pressures and signs of a softer-than-expected slowdown in the U.S. economy, recording their most substantial increases since the 1980s.
Personal consumption expenditure price index (PCE) for October, released on Thursday, is anticipated to indicate a slowdown. If this aligns with expectations, demand for risk assets could rebound, giving the stock market an opportunity to resume its bullish trend.
However, any deviation in the PCE inflation data from economists' expectations, failing to confirm the October Consumer Price Index and Producer Price Index reports, could reignite pressure on the stock market. This uncertainty may raise questions about the economy's soft landing next year, as emphasized in Wednesday's OECD report. According to the OECD, global economic growth is losing momentum and is unlikely to accelerate until 2025, with a forecasted global GDP growth of only 2.7% next year.
In light of Thursday's data, the French economy contracted by 0.1%, and November inflation reached its lowest level since the beginning of the year. Markets are now anticipating a potential ECB rate cut of a quarter point as early as next April.
Chinese equities have traded independently amidst the global rally due to concerns about the country's future economic growth prospects. Reports revealed a contraction in China's manufacturing and services sectors in November.
Oil experienced consecutive days of gains as traders await a key OPEC+ meeting to determine next year's production levels. Gold remained relatively unchanged after a five-day rally, and Bitcoin hovered around the $38,000 mark.
This article was written in cooperation with TradingView