Stocks steady, bonds in euphoric mood on bets of peak rates

  • Asian stock markets:
  • Oil prices recover from their lowest level in four months
  • Bonds rise as weaker US data tightens bets on rate cuts

NEW YORK/LONDON, Nov 17 (Reuters) - Global stocks stabilized near two-month highs on Friday and Treasury yields briefly hit two-month lows, as investors clung to the belief that US interest rates have peaked and could even fall next year.

But reality set in when Federal Reserve Bank of Boston President Susan Collins said Friday that while there is growing evidence that inflation is declining, she was not yet ready for it. They rule out further rate hikes in case they are necessary.

That slowed down Wall Street. The Dow Jones Industrial Average (.DJI) and the Nasdaq Composite (.IXIC) finished flat, and the S&P 500 (.SPX) it rose only 0.13%.

Despite Wall Street's sluggishness, MSCI's gauge of stocks around the world (.MIWD00000PUS) added 0.34%, helped in part by European stocks which rose 1% (.STOXX).

In line with expectations for US rates, the dollar index fell 0.48% and was on track for one of its steepest weekly declines this year. The fall in the dollar helped the yen strengthen markedly to trade below 150 per dollar.

Oil prices recovered from a four-month low, with US crude and Brent up 4% on the day.

A softer tone in U.S. economic data this week has fueled bets on rate cuts, pushing down Treasury yields and boosting stock markets.

November has so far seen one of the strongest performances for stock markets this year, with the MSCI World Stock Index and the S&P 500 Index both rising more than 7%.

"We're still in this environment where we're late cycle and flirting with the idea of ​​whether we're going to go into a recession or not," said Justin Onuekwusi, chief investment officer at investment firm St. James's Place.

"This is the key reason why central bank expectations have become a key risk driver and at the moment it is difficult to look beyond the short term."

OUT BONUSES

Global bond markets were in a bullish mood.

The sharp decline in U.S. Treasury yields since early November continued on Friday, with the yield on the benchmark 10-year bond briefly falling to a two-month low.

The yield on the benchmark 10-year bond was later little changed at 4.439%, from 4.445% late on Thursday, and the two-year bond was last up 6.1 basis points to yield 4.9025%, from 4.842%.

The gap widened between the two- and 10-year Treasury yields, an indicator of expectations that the economy is slowing. The curve inversion was around -46.0 basis points on Friday, compared to -38 basis points the previous day, and remains near its deepest point since early October.

Rate-sensitive two-year bond yields in Germany and Britain fell to their lowest levels since June, and money markets now price in about 100 basis points of rate cuts in the U.S. and euro zone .

In Asia, actions outside Japan (.MIAPJ0000PUS) fell 0.45%, while the Japanese Nikkei (.N225) closed with an increase of 0.48%, consolidating around 3% during the week, helped by the Bank of JapanThe assurance that he was going to maintain his super lax policy.

chinese blue chips (.CSI300) fell 0.12%, having missed the general rebound so far this week.

Sentiment in Asia had been supported by the apparent easing of tensions between the United States and China, and the Chinese press praised the meeting between President Xi Jinping and President Joe Biden.

Gold was unchanged at $1,980.17 an ounce.

Reporting by Koh Gui Qing in New York, Dhara Ranasinghe in London and Wayne Cole in Sydney; editing by Nick Zieminski and Rosalba O'Brien

Our standards: The Thomson Reuters Trust Principles.

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Senior correspondent for the London markets team covering European sovereign bond markets and major macro and financial issues.

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