Stocks Steady, Dollar Rebounds as Shutdown Averted: Markets Wrap

(Bloomberg) — American equity futures were steady in subdued trading as investors assessed the outlook for economic growth and interest rates. The dollar advanced after a US government shutdown was averted.

Contracts on the Nasdaq 100 added 0.3% and those on the S&P 500 were little changed following solid gains on Wall Street on Friday after the so-called core personal consumption expenditures price index increased at the slowest pace since May. Data on Monday showed orders for durable goods fell more than analysts’ expectations in November.

Investors are taking a step back after a stream of robust US economic data saw the Federal Reserve scale back the number of cuts it anticipates in 2025. The PCE data reignited hopes of deeper rate cuts, though overall sentiment remains cautious as investors brace for the prospect of sweeping global tariffs imposed by US President-elect Donald Trump, and as China continues to see a lackluster economic recovery.

“Friday’s PCE data was enough to cheer the mood and reignite hopes about the possibility of lower inflation next year, which would allow the Fed to cut rates faster,” said Daniela Hathorn, a senior market analyst at Capital.com. “The avoidance of a US government shutdown over the weekend has also helped ease some of the negative pressure on stocks.”

A Bloomberg gauge of the dollar rose after sliding 0.5% on Friday, and Treasury yields ticked higher. President Joe Biden signed funding legislation to keep the US government operating until mid-March, avoiding a year-end shutdown and kicking future spending decisions into Trump’s presidency.

Europe’s Stoxx 600 index turned higher as drugmaker Novo Nordisk A/S staged a partial recovery from the biggest slump in more than two decades on Friday. 

Among other individual movers, Evolution AB plunged after the UK Gambling Commission began a review of its Malta operations. Direct Line Insurance Group Plc shares rose after Aviva Plc agreed to buy the insurer in a deal valuing the firm at around £3.7 billion ($4.7 billion).

“There are still hopes that the US stock markets in particular will end 2024 with a positive undertone,” Dana Malas, a strategist at SEB, wrote in a note. “After two explosive weeks of central banking and news, to say the least, it is time for the market to recharge batteries and update forecast models for the world that begins on January 20 with Donald Trump in the White House.”

European government bonds fell after European Central Bank President Christine Lagarde said policymakers remain alert to lingering price pressures in the services sector, while confident the central bank is nearing its consumer-price target.

The euro-area economy will pick up less momentum next year than previously foreseen and only expand slightly more strongly than in 2024, according to a Bloomberg survey. The predictions are more downbeat than those of the ECB, which also lowered its outlook this month as it cut interest rates for the fourth time since June.

A gauge of Asian equities snapped a six-day decline, with benchmarks in South Korea and Taiwan rising more than 1%. Asian stocks are set for their first quarterly loss since September 2023 while a gauge of the region’s currencies fell to its lowest in more than two years last week.

Elsewhere, oil steadied after a weekly drop, as traders gauged Trump’s threat to reimpose US control over the Panama Canal.

Key events this week: 

• Bank of Canada issues summary of deliberations, Monday
• RBA publishes minutes of Dec. rate meeting, Tuesday
• Christmas Day, Wednesday
• Bank of Japan Governor Kazuo Ueda addresses Keidanren council, Wednesday
• US initial jobless claims, Thursday
• Colombia’s central bank publishes minutes of rate meeting, Thursday
• Japan Tokyo CPI, unemployment, industrial production, retail sales, Friday
• BOJ publishes summary of opinions for December meeting, Friday
• South Korean court to hold preliminary hearing on impeachment of President Yoon Suk Yeol over his martial law declaration, Friday
• Brazil unemployment, Friday

Some of the main moves in markets: 

Stocks

• S&P 500 futures were little changed as of 8:33 a.m. New York time
• Nasdaq 100 futures rose 0.3%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 rose 0.3%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.3% to $1.0394
• The British pound fell 0.4% to $1.2524
• The Japanese yen fell 0.6% to 157.19 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $95,420.11
• Ether rose 1.3% to $3,325.06

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.55%
• Germany’s 10-year yield advanced three basis points to 2.32%
• Britain’s 10-year yield advanced four basis points to 4.55%

Commodities

• West Texas Intermediate crude fell 0.4% to $69.17 a barrel
• Spot gold fell 0.3% to $2,615.71 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Winnie Hsu.

©2024 Bloomberg L.P.