NEW YORK/LONDON June 9 (Reuters) – U.S. shares struck
new highs for the year on Friday and helped lift world stocks to
a 13-month peak, as rising bets that the Federal Reserve will
skip a rate hike next week overshadowed worries about U.S.
markets being drained of cash.
Helped by a surge in Tesla Inc, which jumped as
much as 5.7%, the S&P 500 rose to levels last seen in
August before paring gains. It finished higher 0.1%, the best
close since Aug. 16. The Nasdaq Composite added 0.13%,
and the Dow Jones Industrial Average rose 0.16%.
Over in Europe, the STOXX 600 index lost 0.13%, but
MSCI’s broadest index of Asia-Pacific shares outside Japan
jumped 0.74% overnight. Combined with gains on
Wall Street, the MSCI’s broadest index of world stocks
added 0.18% at a 13-month high. For the week,
the index for world stocks might notch a 0.6% rise.
“As of today, the S&P 500 is back in a bull market,” said
Arthur Hogan, chief market strategist at Briley Wealth, noting
that the index finished Thursday with a 20% gain off its recent
lows. “The one thing that could tip over the apple cart is an
over-aggressive Fed.”
Refinitiv data showed the S&P 500 up 20% from its Oct. 12
closing low. The most commonly accepted definition of a bull
market is a 20% rise off a low, and a 20% decline from a high
for a bear market, but that is open to interpretation.
Traders now lay 73% odds on the Fed keeping rates
steady on June 14, in a range of 5%-5.25%, pausing its most
aggressive hiking cycle since the 1980s.
Bets for a pause were supported by data on Thursday that
showed the number of Americans filing new jobless claims surged
to a more than 1 1/2-year high, indicating a loosening labour
market that could further quell inflation.
Investors also hope the Fed will pause its rate rise
campaign as a quirk of the U.S. debt ceiling negotiations has
posed a potential threat to market liquidity.
The U.S. government is expected to rush to sell short-term
debt to replenish its Treasury General Account (TGA),
potentially at yields so high that banks raise deposit rates to
compete for funding, reducing interest in riskier assets like
equities.
“We’re all worried about liquidity,” said Ben Jones,
director of macro research at Invesco. The Fed, he added, “still
wants to tighten” policy and therefore may allow the TGA rebuild
to drain liquidity from markets without stepping in to provide
other support tools.
This fear was not dominating trading on Friday, however.
Fed Chair Jerome Powell said on May 19 it was still unclear
whether U.S. interest rates will need to rise further, and the
risks of overtightening or undertightening had become more
balanced.
YIELDS UP
Uncertainty about the U.S. rates outlook supported Treasury
yields.
Two-year Treasury yields, which are extremely
sensitive to monetary policy expectations, rose to 4.602%, while
the yield on benchmark 10-year notes US10YT=RR climbed to
3.743%.
The U.S. dollar index, which measures the performance
of the U.S. currency against six others, rebounded 0.21% to
103.47.
The euro slipped 0.32% to $1.0748, just below
Thursday’s two-week high of $1.0787.
Elsewhere, the Turkish lira hit a new record low
overnight of 23.54 per dollar, even as President Tayyip
Erdogan’s appointment of a U.S. banker as central bank chief
sent a strong signal for a return to more orthodox policy.
Erdogan last week put well-regarded former finance minister
Mehmet Simsek back in the post. Simsek said this week that the
guiding principles for the economy would be transparency,
consistency, accountability and predictability.
Leading crypto asset bitcoin dipped 0.2% to
$26,450 after crypto exchange Binance said it was suspending
dollar deposits and would soon pause fiat currency withdrawal
channels following a U.S. Securities and Exchange Commission
crackdown.
Crude oil edged higher but gains were tempered by a report
that the United States and Iran were close to a nuclear deal,
although denials from both parties kept it off the previous
session’s lows.
The prospect of a deal, which reportedly included scope for
an additional 1 million barrels per day of Iranian supply,
initially dented crude prices.
Brent crude futures whipsawed over the course on Friday, and
ended down 1.3% at $74.98 a barrel. West Texas Intermediate
crude ALOST LOST 1.3% at $70.38 a barrel.
(Reporting by Naomi Rovnick and Kevin Buckland; Editing by
Chizu Nomiyama, Nick Macfie, Mark Potter and Daniel Wallis)
