- Microsoft (NASDAQ 🙂 leads Wall Street rally, fueled by AI mania and rate cut bets
- But will the FOMC minutes ruin the party?
- Dollar falls to three-month lows; Increases due to the impulse of the RBA and China
Stocks enjoy pre-Thanksgiving rally ahead of Fed minutes
Stock markets got off to a positive start on Monday in what is a holiday-shortened week in the United States, while the optimistic mood appears to largely hold on Tuesday as investors await more clues on the path of interest rates.
The Federal Reserve will publish the minutes of its latest monetary policy meeting a day early, at 19:00 GMT, to take into account that markets will be closed on Thursday for Thanksgiving. Market prices for the Fed’s rate path have moved quickly over the past week as investors increased their rate cut bets following lower-than-expected October CPI numbers.
The minutes are therefore likely to offer outdated views on the economy, as apart from weaker inflation, growth indicators have also deteriorated somewhat since the November meeting. However, if the prevailing “higher for longer” message is repeated in the minutes, rate cut expectations could take a hit, dragging stocks lower and giving Treasury yields an advantage. upward.
AI rebound boosts Wall Street, Asia weakens after China stimulus
However, Fed policy expectations are not the only factor on Wall Street this week, even amid a light calendar, as AI mania is back in the headlines.
Following the unexpected ouster of Sam Altman as CEO of OpenAI on Friday, Microsoft hired Altman and his co-founder Greg Brockman to join the tech giant’s new advanced AI research team. With many OpenAI employees threatening to leave the company and potentially also join Microsoft in protest of the firing, this is seen as a major victory for the latter.
Microsoft’s stock price hit a new all-time high on Monday, while other AI stocks like Nvidia (NASDAQ 🙂 also rose. The timing couldn’t have been better for Nvidia, which will report a rise in its third-quarter earnings today .
It closed Monday at a new 2023 high and is only about 4% below its all-time high from two years ago.
What further boosts sentiment today is the announcement of new measures by Beijing to increase lending and support the real estate sector. China is reportedly preparing a list of 50 developers who will be eligible for special financing, aiming to avoid further defaults and shore up the beleaguered property market.
However, stocks in Asia were mixed today, underscoring the challenges China faces in restoring confidence in the economy, as well as contrasting optimism in the United States.
Aussie dollar backed by hawkish RBA and increasingly bullish yen
The Australian dollar initially rose on headlines as the country’s iron ore exporters would benefit from any recovery in China’s property sector, before giving up some of their gains. But the improving outlook in China is not the only thing that has helped the Australian dollar’s latest rally against the US dollar, as the RBA has taken an aggressive turn under new governor Michele Bullock. Given that both your comments and the RBA’s November meeting minutes today sound concerned about inflation, the RBA is now the only major central bank, other than the Bank of Japan, that has substantial odds of a rate hike .
As for the dollar, it is extending its decline today, falling to almost three-month lows against a basket of currencies, mainly due to the strong reversal of the yen.
The Japanese currency has seen its fortunes change dramatically this month as declining inflation in Europe and the United States is seen as paving the way for rate cuts next year, while the Bank of Japan may finally be getting its wish. that inflation remains sustained above 2%. and has been dropping subtle hints that it could soon abandon negative rates.
Canadian dollar eyes Canadian CPI-OPEC+ meeting
The dollar briefly hit a two-and-a-half-month low of 147.14 yen on Tuesday, while its Canadian counterpart was flat ahead of Canadian CPI figures due later in the day.
It has not enjoyed much of a rebound against the dollar as oil prices have been declining since September. However, speculation that OPEC+ will announce further oil production cuts when it meets on November 26 has managed to put a floor on oil prices for now.
WTI futures last traded slightly lower, snapping two days of gains.