Stocks hold, dollar cautious on inflation data

Global stocks were flat on Friday as the dollar rose ahead of U.S. inflation data, which could weigh on expectations of how quickly interest rates will fall in 2024.

Asian shares fell after Chinese internet stocks tumbled after the regulator published draft rules that would impose spending limits on players. The MSCI All-Shares index was flat on the day but rose 0.5% for the week, poised for an eighth straight weekly gain, the longest streak since early 2018.

Markets have been in a celebratory mood for weeks as global inflation data showed a slowdown and the US Federal Reserve signaled it was done raising interest rates.

The S&P 500 is headed for its eighth straight weekly gain, its longest since late 2017, benefiting from a “Santa rally” — where stocks often rise in the week before Dec. 25 — for the first time in two years.

The data has markets braced for a downside surprise in the last key figure before Christmas, the November personal consumption expenditure index due at 1330 GMT with consensus expectations for a 0.2% monthly rise.

But with around 150 basis points of rate cuts in the markets for 2024, there is a limit to how much investors can expect in terms of easing.

“I think if the results come in slightly below expectations, that will add to the Santa rally,” said Fiona Cincotta, market strategist at City Index.

“It will almost be a confirmation that the market is waiting for the consolidation of these expectations,” she added.

U.S. stocks rebounded overnight after a sharp drop at the end of Wednesday’s session, with the S&P 500 up 1%.

The index is less than 2% from its all-time high.

S&P 500 futures were flat, while Nasdaq 100 futures fell 0.1%. Nike shares fell in premarket trading after the company cut its sales forecast, blaming consumer caution and weighing on European sportswear makers such as Adidas, Puma and JD Sports.

STOXX 600 < .STOXX > remained stable throughout the day. The index strengthened by almost 13% this year. Most of that gain has materialized over the past eight weeks thanks to falling inflation in the eurozone, which has fueled expectations of a quick interest rate cut next year.

Trading in the oil market remained uncertain due to concerns about the safety of shipping in the Red Sea. Oil prices recovered some of the overnight losses after Angola announced it would leave OPEC, raising questions about the producer group’s unity in its efforts to curb global supplies.

Brent crude futures rose 0.8% to $80.00 a barrel.

A TALE OF TWO SHELTERS

In the currency market, the euro hit its highest level against the dollar since August, rising 0.13% to $1.1024.

The European Central Bank is expected to cut rates almost as quickly as the Fed next year, depending on futures market prices.

The dollar has been rocked in recent weeks, losing 0.2% against a basket of major currencies.

Sterling rose 0.4% to $1.2743, recovering from government data that showed Britain’s economy shrank 0.1% in the third quarter and only saw no growth in the second quarter.

The Japanese yen, which has been the worst-performing currency against the dollar this year thanks to the Bank of Japan’s policy of keeping interest rates low, was unchanged at 142.05.

It has lost around 8% of its value in 2023 alone, compared to the Norwegian krone’s 4% loss, which is the second worst performer. The Swiss franc takes the prize, gaining 7.5%, followed by the pound, which is up 4.7%.

Gold is expected to end the current week and year with a 12% year-over-year gain at $2,049 an ounce.

Bitcoin is up 160% year-to-date to $44,114.

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