Berliner Tageszeitung - Stock markets rise on rate-cut hopes, oil slumps

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Stock markets rise on rate-cut hopes, oil slumps

POLITICS 06.12.2023

Stock markets rise on rate-cut hopes, oil slumps / Photo: © AFP/File

Global equities rose Wednesday with Frankfurt striking a record peak, as investors tracked resurgent hopes of interest rate cuts from the European Central Bank and the US Federal Reserve.

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Meanwhile, oil prices slumped, with the main US oil contract, WTI, falling below $70 per barrel for the first time since July on concerns about weak demand and ample supplies despite pledges by OPEC+ nations to further cut production.

Bitcoin jumped to $44,490.65, hitting the highest level since April 2022 on optimism the United States would soon allow broader trading of the biggest cryptocurrency, extending its bullish run.

Frankfurt's DAX stocks index hit a fresh record high, passing the 16,600 level for the first time, and Paris CAC 40 rose as sliding German factory orders added to hopes of an interest-rate reduction from the ECB.

"Risk-on sentiment is driving price action this morning amid growing expectations that the European Central Bank could cut rates early next year," said Victoria Scholar, head of investment at trading firm Interactive Investor.

"Markets are pricing in an almost 90-percent chance of a cut from the ECB in the first quarter of 2024."

Equity investors digested data pointing to a softening US labour market, rekindling hopes of a Fed rate reduction.

Following Tuesday's below-forecast job openings data, on Wednesday jobs data from payrolls firm ADP also came in softer than expected, and trade data showed a considerable drop in exports.

The data lifted optimism ahead of the closely watched non-farm payrolls report due Friday, which investors hope will confirm the economic slowdown sought by the Fed.

"Cooling job vacancy data from the US helped bolster expectations that we are at the pivot point of this rate hiking cycle -- though more news on the US labour market through the course of this week will provide a fuller picture," added AJ Bell investment director Russ Mould.

Markets rallied in November on growing hope that with inflation continuing to fall and other parts of the economy easing, the Fed will be able to slash rates in 2024, with some suggesting as soon as the first quarter.

The bank's statement after next week's scheduled policy meeting will be pored over by traders hoping for clues about decision-makers' thinking on rates in light of the recent data.

In addition to WTI falling below $70 per barrel, the price of the main international contract, Brent, was trading at five-month lows.

Michael Hewson at CMC Markets pointed to rising US crude exports, which are set to rise to six million barrels per day, as undermining confidence that pledged cuts by OPEC+ countries will be enough given the weak state of the global economy.

Asia enjoyed some much-needed buying, with Tokyo up two percent and Sydney one percent higher.

Hong Kong, Sydney, Singapore, Seoul, Bangkok, Mumbai, Wellington, Taipei and Jakarta were also on the rise.

Shanghai fell, with sentiment dented after Moody's on Tuesday warned it had downgraded its outlook for China's credit rating owing to the country's rising debt levels and concerns over its battered property sector.

- Key figures around 1630 GMT -

New York - Dow: UP 0.1 percent at 36,161.85 points

London - FTSE 100: UP 0.3 percent at 7,515.38 (close)

Paris - CAC 40: UP 0.7 percent at 7,435.99 (close)

Frankfurt - DAX: UP 0.8 percent at 16,656.44 (close)

EURO STOXX 50: UP 0.7 percent at 4,483.26 (close)

Tokyo - Nikkei 225: UP 2.0 percent at 33,445.90 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 16,463.26 (close)

Shanghai - Composite: DOWN 0.1 percent at 2,968.93 (close)

Euro/dollar: DOWN at $1.0780 from $1.0797 on Tuesday

Pound/dollar: DOWN at $1.2590 from $1.2595

Dollar/yen: UP at 147.27 yen from 147.15 yen

Euro/pound: DOWN at 85.68 pence from 85.72 pence

West Texas Intermediate: DOWN 3.8 percent at $69.55 per barrel

Brent North Sea crude: DOWN 3.4 percent at $74.58 per barrel

burs-rl/rox

A. Walsh--BTZ

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