Authored by Sinéad Carew and Samuel Indyk
NEW YORK LONDON (Reuters) – MSCI’s global equities index saw an increase on Friday, accompanied by a rise in U.S. Treasury yields and the dollar, as positive economic data and earnings reports helped investors overlook any apprehensions leading up to the U.S. presidential inauguration.
The U.S. dollar strengthened against major currencies following four consecutive days of decline, while U.S. Treasury yields, after a three-session decline, hit a two-week low before rebounding.
Recent Federal Reserve data indicated a 0.6% rise in U.S. manufacturing output last month, following a revised 0.4% increase in November, likely due to increased production after the resolution of a factory worker strike.
Additionally, data showed a rise in U.S. single-family homebuilding to a 10-month high in December, suggesting a resurgence in construction activity towards the end of the year, despite concerns about rising mortgage rates and an excess of new homes on the market.
All three major indexes on Wall Street experienced gains for the day, with the S&P 500 and the Dow achieving their largest weekly increases since the U.S. presidential election week. The Nasdaq also recorded its most significant weekly advance since early December.
“There’s a sense that the economy is stronger than anticipated, and inflation is not as significant of a concern as investors may have previously thought,” noted Phil Orlando, chief equity strategist at Federated Hermes, citing the recent production and housing data, as well as inflation figures released earlier in the week.
“Given the oversold nature of the market, we’re seeing a positive rebound here,” he added.
Earlier in the week, lower-than-expected core inflation data led to a decline in the U.S. 10-year yield, supporting stocks. Furthermore, comments from Fed Governor Christopher Waller on Thursday hinted at the possibility of three or four rate cuts in 2025 if economic data weakens.
However, Orlando expressed caution about the sustainability of Friday’s levels post the transition of power from Democratic President Joe Biden to Republican President-elect Donald Trump on Monday.
“We’re transitioning between very different fiscal policy approaches. I’m concerned that the market may become unsettled once Trump assumes office,” Orlando remarked.
“We’re uncertain about his rhetoric on Monday. We don’t know what executive orders he may implement on day one.”
Anthony Saglimbene, chief market strategist at Ameriprise, noted that strong bank earnings reports and outlooks, along with economic data, had boosted investor confidence since Monday.
Like Orlando, Saglimbene expressed apprehension about post-inauguration volatility: “I wouldn’t rely too heavily on this stability until there’s more clarity on tariffs and immigration policy,” he cautioned.
On Wall Street, the Dow closed up 334.70 points, or 0.78%, at 43,487.83, while the S&P 500 added 59.32 points, or 1%, to 5,996.66, and the Nasdaq finished up 291.91 points, or 1.51%, at 19,630.20.
For the week, the Dow rose by 3.69%, the S&P 500 increased by 2.91%, and the Nasdaq climbed by 2.45%.
MSCI’s global stocks index rose by 6.60 points, or 0.78%, to 855.23. Before the official close, the index indicated a weekly gain of approximately 2.5%, marking its most significant increase since the week of the November election.
Earlier in the day, Europe’s index closed up by 0.69%, leading to a weekly gain of 1.7%, its strongest performance since the week starting December 2.
In the U.S. Treasuries market, yields saw an upward trend in a volatile session, supported by positive housing and industrial production data that reinforced expectations of a slower pace of rate cuts by the Fed.
The yield on the U.S. 10-year notes increased by 1.5 basis points to 4.621%, up from 4.606% on Thursday, while the 30-year bond yield rose to 4.8535% from 4.845%.
The two-year note yield, which typically aligns with Fed interest-rate expectations, rose by 4.5 basis points to 4.283%, up from 4.238% on Thursday.
In the currency market, the dollar strengthened on the day but experienced a weekly decline after a six-week winning streak, as investors awaited the inauguration for more policy clarity.
The dollar index, measuring the greenback against a basket of currencies, rose by 0.37% to 109.37.
The euro declined by 0.25% to $1.0272, while against the Japanese yen, the dollar strengthened by 0.69% to 156.19.
However, the yen saw a weekly increase as policymakers’ statements indicated expectations for a quarter-point Bank of Japan rate hike next week. Sources mentioned to Reuters that the BOJ was likely to maintain a hawkish policy stance and raise rates next week.
Sterling weakened by 0.6% to $1.2166 following weaker-than-expected British retail sales data in December.
In the commodities market, oil prices closed lower on Friday but marked a fourth consecutive weekly gain, driven by concerns about oil supply disruptions due to the latest U.S. sanctions on Russian energy.
Crude settled down by 1% at $77.88 a barrel, while Brent settled at $80.79 per barrel, down by 0.62%.
Gold stocks in COMEX-approved warehouses surged by one-third in the past six weeks as market participants sought deliveries to hedge against potential import tariffs from the incoming U.S. president.
Gold prices declined on Friday but were on track for a weekly gain as uncertainties surrounding Trump’s policies and expectations of further interest rate cuts pushed it above the critical $2,700 level.
Gold fell by 0.43% to $2,702.06 an ounce, while U.S. gold rose by 0.19% to $2,751.60 an ounce.
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