European shares edged toward a weekly gain after European Central Bank President Christine Lagarde said policy makers are in a position to pause after a tightening cycle that risks plunging the euro area into a recession.
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The ECB is now at a point where it can assess the impact of its tightening, Lagarde said, echoing other policy makers who suggested on Friday that further tightening may not be necessary. An improvement in German business confidence provided another ray of light against a gloomy economic backdrop for the region.
The Stoxx Europe 600 index was about 0.2% higher, on track for its best month since January. BASF SE led an advance for the chemical sector after Bloomberg News repored that Abu Dhabi National Oil Co. is exploring an acquisition of its Wintershall Dea unit. US equity futures were little changed.
“It seems the worst for the euro area economy could be behind us,” said Karsten Junius, chief economist at Bank J. Safra Sarafin Ltd. “The economic dynamic is not deteriorating further and might stabilize at low levels instead. This might provide the ground for slightly stronger private consumption in the coming quarters.”
Treasuries declined after trading resumed following a holiday, paring gains for the month. The 10-year yield rose more than six basis points, tracking declines in European bonds following a report Thursday that Germany will suspend debt limits for a fourth consecutive year, adding to concerns over more borrowing. The Bloomberg dollar index steadied.
Global stocks are on track for the best month in three years, with the MSCI All Country World Index up 8.6% this month amid growing hopes for peaking US interest rates. Traders are awaiting manufacturing data from the world’s biggest economy later Friday for further clues on the policy path.
“Lower bond yields are driving equity valuations, although the fundamental reason behind the drop in yields, lower inflation caused by weaker growth, isn’t completely discounted into earnings estimates,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. “Eventually, profit expectations will have to align with economic reality.”
A gauge of business expectations in the euro area’s biggest economy rose for a third month in November, pointing to an impending recovery for an economy that is probably in a recession and beset by a budget crisis. Data on economic output earlier had highlighted Germany’s struggle to recover from an energy-induced downturn last winter and the mounting impact of higher borrowing costs.
RCB Governing Council Member Robert Holzmann said there’s equal probability of a rate hike or cut in the second quarter of 2024, while his colleague Francois Villeroy de Galhau said the central bank won’t increase borrowing costs again, unless there is an unexpected event.
Asian stocks were mixed. Hong Kong and mainland Chinese equities dropped, reversing Thursday’s rally inspired by Beijing’s widening property rescue campaign. Japanese stocks rose in catch-up play after a national holiday, while those in Australia also gained.
In China, a gauge of developer stocks fell 1.9% in mid-afternoon trade, following a 8.9% jump Thursday. The previous surge came after Bloomberg News reported that China may allow banks to offer unsecured short-term loans to qualified builders for the first time, the latest effort to arrest a housing slump.
“The property developer debt issue will be solved sooner or later,” said Jian Shi Cortesi, a fund manager at GAM Investment Management. “If this measure is not enough, we will see more support next year,” she added, referring to the report on banks extending unsecured loans.
Oil held a decline after the OPEC+ alliance was forced to delay a critical meeting amid a dispute over output quotas, casting a pall of uncertainty over the group’s production policy for next year.
Key events this week:
- US S&P Global Manufacturing PMI, Friday
- Black Friday, traditional kick-off for the US holiday shopping season
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.1% as of 11:39 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average rose 0.2%
- The MSCI Asia Pacific Index fell 0.4%
- The MSCI Emerging Markets Index fell 0.8%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0914
- The Japanese yen was little changed at 149.57 per dollar
- The offshore yuan was little changed at 7.1575 per dollar
- The British pound rose 0.2% to $1.2564
Cryptocurrencies
- Bitcoin rose 1.5% to $37,814.49
- Ether rose 1.6% to $2,102.55
Bonds
- The yield on 10-year Treasuries advanced six basis points to 4.47%
- Germany’s 10-year yield advanced two basis points to 2.64%
- Britain’s 10-year yield advanced three basis points to 4.29%
Commodities
- Brent crude rose 0.4% to $81.78 a barrel
- Spot gold rose 0.2% to $1,995.56 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Matthew Burgess.
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