Gold rises, shares fall as optimism about interest rate cuts disappears – 01-04-2024

Gold prices hit new all-time highs on Monday, but Wall Street stocks fell from near record highs, with optimism that the Federal Reserve was about to cut interest rates fading as a strong US economy negates the need for cuts any time soon. term expires.

Chinese shares led a rally in most of Asia overnight against a generally upbeat backdrop of the global economy, while Japanese shares tumbled and the yen remained near levels that kept traders wary of a currency intervention.

The dollar rose after data showed the US manufacturing sector expanded in March for the first time since September 2022, while the yen hovered below 152 per dollar, leaving traders wary of an impending intervention.

The dollar index, a measure of the U.S. economy against six peers, rose 0.55%.

Oil prices remained near five-month highs as markets expected tighter supply due to OPEC+ cuts and after attacks on Russian refineries, while Chinese production data supported a stronger demand outlook.

Fed Chairman Jerome Powell said Friday that the inflation data released that day “is what we expected” and that “you’re not going to see us overreact,” suggesting the U.S. central bank is content to remain in wait-and-see mode.

“The potential for a cut keeps getting postponed because Powell says almost in a giddy tone that this is a great environment. Interest rates are above average, not wild, but above average. We don’t need to cut them because the economy is doing so well,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“You don’t want another 1970s event where the Fed cut too quickly and inflation flared up and skyrocketed. It’s better to keep those cuts in your pocket,” Ghriskey added.

The Dow Jones Industrial Average fell 0.69%, the S&P 500 lost 0.39% and the Nasdaq Composite fell 0.2%.

European markets were closed on Monday and most markets around the world were closed on Friday.

Earlier on Friday, the Personal Consumer Expenditure Price Index (PCE) report boosted expectations for looser US monetary policy and pushed gold to a new record high. U.S. gold futures rose 0.93% to $2,238.10 an ounce.

U.S. Treasury yields rose after stronger-than-expected manufacturing data raised doubts about whether the Fed can deliver on the three rate cuts it forecast at its last policy meeting.

The yield on the two-year Treasury note, which reflects interest rate expectations, rose 9.8 basis points to 4.718%, while the yield on the benchmark 10-year note rose 13.7 basis points to 4.331%.

Japan’s Nikkei tumbled 1.4% at close, weighed on concerns about a yen-buying intervention that would hurt exporters’ profit expectations and returns for foreign investors.

A business survey showing a deteriorating mood among major manufacturers gave another reason to sell shares on the first day of Japan’s new fiscal year, with analysts saying investors took the opportunity to book profits as the Nikkei still was close to the record peak reached just over a week ago.

US crude recently rose 1.27% to $84.23 per barrel and Brent was at $87.74, up 0.85% on the day.