Stocks are on cruise control as rate-cut expectations boost the outlook. The ongoing downward trend for global bond yields boosted confidence, which led to a slight increase in the value of global stock markets on Thursday. These markets are on track to achieve their highest monthly gain since the first COVID-19 vaccination breakthroughs in 2020.

A rush of insufficient economic data from Germany, France, and Italy strengthened betting that interest rates are going for the chop next year. Asia had made fresh gains of 0.2-0.3% overnight, and Europe followed suit. This was because Europe continued to make gains.

The regional advances and similarly higher Wall Street futures helped raise the MSCI’s main world stocks index (.MIWD00000PUS), which covers 47 nations, by a tiny 0.01%, consolidating its almost 9% increase this month. The index tracks 47 countries.

The European statistics, which included reports of a contracting economy in France, caused the currency markets to respond by lowering the euro’s value. Additionally, bond traders began to push forward their predictions of a rate cut by the European Central Bank for April. The FRX

The results “confirm what we have been saying for a little while, Europe is already in recession but it is a mild recession,” said Elwin de Groot, Head of Macro Strategy at Rabobank. “Europe is already in recession.”

De Groot continued by saying, “So we see those rate-cut expectations gaining hold in the market, although I think maybe it is a bit overdone as I don’t think central banks will be lured early into cutting rates,” pointing to the persistent uncertainties.

In early trade, the yield on Germany’s 10-year bond, which serves as the benchmark for the union, dropped to 2.394%, marking the lowest level since late July. This was because new data also showed that inflation throughout the eurozone had slowed again this month.

Since reaching their highest levels in over a decade in October, bond rates in the United States and other major economies have likewise significantly declined. The yields on U.S. Treasury securities, often the primary factor in determining the cost of borrowing money worldwide, have experienced their most significant decline since 2008.

Overnight, the MSCI Asia-ex-Japan stocks index (.MIAPJ0000PUS) made a 0.3% increase, further solidifying its over 7% increase for the month, its highest level since January.

The Nikkei (.N225) of Japan and Taiwan (.TWII) were closely behind the KOSPI (.KS11) of South Korea, which led the rally with a gain of 10.6%.

The ‘no (hard) landing’ and ‘fed done’ scenarios take the market players’ actions very seriously. According to John Milroy, an investment adviser at Ord Minnett in Sydney, “the modest domestic stimulus that China is implementing is having a positive effect.”

According to inflation prints and bond markets, the central banks are at least due for a break in the cycle of raising interest rates. That kind of market,” he went on to say.

The Hang Seng Index (.HSI) of Hong Kong recovered from an early decline to end the day 0.3% higher. In comparison, China’s CSI300 Index (.CSI300) advanced 0.2%, even though the Chinese manufacturing data issued on Thursday was disappointing.

The factory survey, which was carefully followed, revealed that manufacturing activity decreased for a second consecutive month in November and at a faster rate. This indicates that further government support is required to bolster economic growth, the second biggest in the world behind the United States.

In comparison, the Hang Seng is down by half a percentage point for the month, while the CSI300 has dropped by more than two percent and is now lower for the fourth consecutive month.

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The price of oil increased by a small amount after climbing by more than one dollar on Wednesday in anticipation of anticipated production curbs by the OPEC+ group. In London, the price of a barrel of Brent rose by 1.25 percent to $84.15, while the price of an ounce of gold, a safe-haven asset, fell to $2,038.

Even though officials from the United States Federal Reserve released contradictory statements on Wednesday, investors continued to focus on remarks made by Federal Reserve Governor Christopher Waller on Tuesday. Waller is a powerful and historically hawkish voice at the bank. Waller says rate reductions might start in a few months if inflation decreases.

On Thursday, the much-anticipated data on the inflation rate of personal consumption expenditures in the United States will be made public. In addition, Federal Reserve Chair Powell is scheduled to deliver a speech on Friday, and it is anticipated that he will provide significant insights before the December meeting of the Federal Reserve.

In a single month, the financial conditions in the United States have decreased by one hundred basis points, making them the most relaxed since the beginning of September.

Interest rate futures markets in the United States currently price over one hundred basis points of rate reduction beginning in May of the following year. Additionally, the two-year Treasury note yield is at its lowest level since July; it has dropped almost forty basis points only this week alone.

In a note on their 2024 global forecast, analysts at J.P. Morgan stated, “We expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed.” The Federal Reserve made this statement in the absence of quick relaxation.