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GLOBAL MARKETS-Global stocks tumble as Fed signals slower pace of rate cuts
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GLOBAL MARKETS-Global stocks tumble as Fed signals slower pace of rate cuts
Nov 15, 2024 12:13 PM

*

MSCI index down for fourth straight session

*

Dollar slips but poised for weekly gain

*

US retail sales slightly above expectations

(Updated at 2:16 p.m. ET/1916 GMT)

By Chuck Mikolajczak

NEW YORK, Nov 15 (Reuters) - A gauge of global stocks

was set for its biggest weekly drop in two months and the

10-year U.S. Treasury yield hit its highest level in 5-1/2

months on Friday as economic data and comments from Federal

Reserve officials indicated a slower pace of interest rate cuts

ahead.

Fed Chair Jerome Powell said on Thursday that the central bank

did not need to rush to lower interest rates due to ongoing

economic growth, a solid job market and inflation that remains

above its 2% target.

The U.S. Commerce Department on Friday reported that retail

sales rose 0.4% last month after an upwardly revised 0.8%

advance in September. The growth topped the 0.3% rise expected

by economists polled by Reuters, after a previously reported

0.4% gain in September.

The Fed on Thursday somewhat changed its message that it would

continue to cut interest rates, now showing "more sympathy for

if the data doesn't allow them to do that, they're not going to

do that, they're going to take their time," said Matt Stucky,

chief portfolio manager for equities, Northwestern Mutual Wealth

Management in Milwaukee, Wisconsin.

In addition, the Labor Department said on Friday that import

prices unexpectedly rose 0.3% last month after an unrevised 0.4%

decline in September amid higher prices for fuels and other

goods. Analysts had expected a decline of 0.1%.

Equities had rallied in the wake of the U.S. presidential

election, as investors gravitated toward assets expected to

benefit from U.S. President-elect Donald Trump's policies in his

second term after he pledged to impose higher tariffs on

imports, lower taxes and loosen government regulations.

But the rally has stalled in recent days as markets try to

calibrate the Fed's rate cut trajectory and any legislative

policy changes.

"It's kind of like peak uncertainty right now," Stucky

said. "There's a new administration coming through, but I don't

know if there's a whole lot of certainty out there for what's

actually going to occur until it starts to get introduced and

debated on Capitol Hill."

On Wall Street, the Dow Jones Industrial Average fell

339.38 points, or 0.77%, to 43,412.72, the S&P 500 fell

89.53 points, or 1.51%, to 5,859.55, and the Nasdaq Composite

fell 485.04 points, or 2.54%, to 18,622.49. Each of the

three major indexes closed at record highs on Monday.

Other Fed officials

in comments

on Friday also clouded the picture on the timing and

magnitude of more rate cuts.

MSCI's gauge of stocks across the globe lost

9.47 points, or 1.11%, to 841.73, on track for its fourth

straight decline, following five straight advances.

In Europe, the STOXX 600 index closed down 0.77% but

managed to eke out a small weekly gain, its first in four weeks.

Bond yields and the dollar have surged not just on growth

prospects but also on concerns that Trump's policies may

rekindle inflation after a long battle against price pressures

following the COVID-19 pandemic. In addition, tariffs could lead

to increased government borrowing, further ballooning the fiscal

deficit and potentially causing the Fed to alter its course of

monetary policy easing.

The dollar index, which tracks the U.S. currency against

peers including the euro and Japan's yen, was 0.25% lower on the

day to 106.61 with the euro up 0.14% at $1.0545.

The greenback had risen for five straight sessions and was

on pace for its biggest weekly percentage gain since early

October.

Against the Japanese yen, the dollar weakened 1.34%

to 154.14. Sterling was down 0.32% to $1.2623.

Expectations for a 25 basis point cut at the Fed's December

meeting stood at 61.6% on Friday, down from 72.2% in the prior

session, and 85.5% a month ago, according to CME's FedWatch

Tool.

The yield on benchmark U.S. 10-year notes fell 0.6

basis points to 4.414% after reaching 4.505%, its highest level

since May 31. The yield is up about 11 bps this week and is set

for its eighth weekly rise in the past nine.

U.S. crude fell 2.2% to $67.19 a barrel and Brent

fell to $71.16 per barrel, down 1.93% on the day, on

track for a weekly decline as investors digested a slower Fed

rate cut path and waning Chinese demand.

text_section_type="notes">To read Reuters Markets and

Finance news, click on https://www.reuters.com/finance/markets

For the state of play of Asian stock markets please click on:

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