European shares set for weekly gain


European stocks are on track for a sixth straight week of gains and government bond yields have traded globally near multi-week lows as investors react to positive data and indicate that central banks may not raise rates as aggressively as expected.

The 10-year Treasury yield fell to 3.65% on its return from the Thanksgiving holiday, its lowest since Oct. 5 and down from 4.34% in mid-October.

Germany’s 10-year yield, the eurozone benchmark, stood at 1.91%, just off a seven-week low hit the previous day.

Europe’s STOXX 600 was little changed on Friday and is heading for a weekly gain of 1.5%, its sixth straight weekly percentage gain, after being beaten earlier this year.

“The correction has affected all major asset classes except the dollar and hard commodities and now is a big reversal of that,” said Olivier Marciot, head of multi-asset investments at Unigestion.

“The pace of the (central bank) tightening cycle was unprecedented and created this shock, and now that this specific factor is stabilizing, it is creating momentum for all asset classes.”

The US Federal Reserve has hiked interest rates aggressively throughout this year, but a ‘substantial majority’ of Fed policymakers agreed it would ‘probably soon be appropriate’ to slow the pace of the hike interest rates, according to the minutes of their last meeting on Wednesday.

Expectations for the approaching rate peak were bolstered earlier this month when US inflation data for October was colder than expected.

European equity investors see positive economic data as a reason to buy and welcomed Wednesday’s data showing the German economy grew 0.4% in the quarter and 1.3% on the year – slightly above expectations – thanks to greater growth in household spending.

S&P 500 futures are up 0.15%, though trading is expected to be subdued after Thursday’s Thanksgiving holiday.

Currency markets are also reflecting the recent improvement in risk sentiment, with the safe-haven dollar set to weaken weekly against most G10 currencies.

The British pound was one of the best performers and hit a three and a half month high of US$1.2153 on Thursday.

Asian stocks were struggling more than their European counterparts after China reported another record rise in daily COVID infections as well as more curbs, drowning recent hopes the country would phase out strict zero COVID policies.

Hong Kong’s Hang Seng fell 0.5%, led by a 2.29% drop for the tech sector, although China’s onshore blue chips rose 0.5%, supported by more government measures to support the falling real estate market.

Oil prices rose sharply, reversing declines from earlier in the week, with Brent futures up 1.58% at US$86.69 a barrel and US crude futures up up 2.13% to 79.6%.

Gold rose 0.2% to around US$1,758 an ounce amid dollar weakness.

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