Equities advance, US dollar falls on Fed rate outlook

A gauge of global stocks headed for a third straight gain yesterday and the dollar fell after Federal Reserve (Fed) meeting minutes showed support for tapering interest-rate increases.

European stocks were steady, with trading volumes expected to be lower with the US market closed for the Thanksgiving holiday.

US futures edged higher after the S&P 500 closed at a two-month high Wednesday. Asia’s equities benchmark climbed.

Minutes from the Fed gathering earlier this month indicated several officials backed the need to moderate the pace of rate hikes, even as some underscored the need for a higher terminal rate.

This adds weight to expectations the central bank will raise rates by 50 basis points next month, ending a run of jumbo 75-basispoint increases.

“It was the start of a more different and dovish narrative from the Fed,” said Sunaina Sinha Haldea, global head of private capital advisory at Raymond James.

“Is it a pivot? No, but are we seeing a slowdown in rate hikes and that path downwards towards rate cuts coming through? Yes. I think we will look back and say this was the peak of it.”

Data Wednesday also showed US business activity contracted and unemployment applications rose as the economy cools.

A gauge of dollar strength fell further yesterday, taking declines into a third day. There is no trading in Treasuries due to the US holiday.

Oil fell as the European Union considered a higher-than-expected price cap on Russian crude and signs of a global slowdown increased.

Gold rose for a third day on the Fed minutes. The precious metal has been hurt by the US central bank’s aggressive monetary-tightening policy to curb inflation, which has pushed up bond yields and the dollar and in turn sent bullion tumbling about 16% from its March peak.

In Asian trading, mainland Chinese stock gauges fell as investors weighed the impact of record Covid-19 cases against signs of loosening monetary conditions.

Official comments broadcast Wednesday indicated the People’s Bank of China would allow banks to reduce capital reserves to stimulate growth.

China’s zero-covid policy has had “a significant effect on consumption” while the property crisis is “affecting investment in the sector and affecting property developers,” Gita Gopinath, first deputy managing director for the International Monetary Fund, said in an interview with Bloomberg Television.