(Bloomberg) — Treasuries rallied and the dollar fell after fresh US data kept investors guessing on the size of an expected rate cut from the Federal Reserve next week.
The policy-sensitive two-year Treasury yield dropped six basis points and the dollar retreated 0.3%, falling for a third day. The Stoxx 600 Index rose 0.5%, with Danish stocks hitting a record high for the first since November 2021. US futures pointed to modest gains.
Investors remain divided on the magnitude of the Fed’s anticipated pivot to policy easing starting at next week’s meeting. The debate has continued after data Thursday showed that the US producer price index picked up slightly in August after the previous month’s numbers were revised lower. Meanwhile, an uptick in applications for unemployment benefits renewed concerns about a weakening labor market.
“If I were in the room, I would actually be pushing for a 50 basis-point rather than a 25 basis-point cut,” Evercore Chairman Emeritus Ralph Schlosstein said in an interview with Bloomberg TV. “The balance of risks has shifted from a risk that inflation doesn’t come down as we hope, to a risk that unemployment grows up faster than we would hope.”
Traders are now betting on 33 basis points of cuts from the Fed on Sept. 18, versus 31 basis points on Thursday and 26 basis points on Wednesday.
His view echoed that of former New York Fed President William Dudley, a Bloomberg Opinion columnist and adviser, and chair of the Bretton Woods Committee. “I think there’s a strong case for 50,” he said Friday in Singapore. “I know what I’d be pushing for.”
Thursday’s wholesale inflation data followed the more closely watched consumer price index, which showed underlying inflation accelerated in August. Yet policymakers have made it clear that they’re currently highly focused on softness in the labor market, which is more likely to drive policy discussions in the months ahead.
Key events this week:
- Eurozone industrial production, Friday
- Japan industrial production, Friday
- U. Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.5% as of 9:18 a.m. London time
- S&P 500 futures rose 0.1%
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.5%
- The MSCI Emerging Markets Index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.1092
- The Japanese yen rose 0.9% to 140.61 per dollar
- The offshore yuan rose 0.3% to 7.0975 per dollar
- The British pound rose 0.1% to $1.3140
Cryptocurrencies
- Bitcoin fell 0.3% to $58,043.87
- Ether fell 0.2% to $2,347.98
Bonds
- The yield on 10-year Treasuries declined five basis points to 3.63%
- Germany’s 10-year yield declined three basis points to 2.12%
- Britain’s 10-year yield declined three basis points to 3.76%
- The yield on 2-year Treasuries declined six basis points to 3.58%
Commodities
- Brent crude rose 0.5% to $72.32 a barrel
- Spot gold rose 0.4% to $2,568.62 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sybilla Gross, Richard Henderson and Divya Patil.
©2024 Bloomberg L.P.
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