Global stocks have drifted lower while the dollar has held firm as investors wait for minutes of the Federal Reserve’s latest policy meeting to gauge the timing and extent of possible interest rate cuts in 2024.
Gold eased back from Monday’s record peak while crude oil declined on worries of US interest rates staying high for longer as Fed officials maintained a cautious view on a recent easing of inflation.
Cryptocurrencies ether and bitcoin climbed to fresh six-week peaks amid speculation the US Securities and Exchange Commission (SEC) might approve a spot ether exchange-traded fund.
Markets factor in about 41 basis points of Fed rate reductions in 2024, with a quarter-point cut fully priced in for November.
Traders rushed to rebuild easing bets after data earlier in May showed consumer price pressures eased in April following three months of upside surprises at the start of 2024.
Even so, Fed officials are reluctant to declare the fight against inflation over, with vice-chair Philip Jefferson saying on Monday that it was too early to tell if the slowdown is “long lasting”, and vice-chair Michael Barr saying restrictive policy needed more time.
Minutes of the last Fed meeting due on Wednesday could provide valuable insight into the future policy path, although the deliberations pre-date last week’s softer CPI reading.
Europe’s benchmark STOXX index of 600 stocks slid 0.3 per cent on Tuesday following an earlier decline of 0.9 per cent in MSCI’s broadest index of Asia-Pacific shares outside Japan.
US markets looked set to follow the muted tone with Nasdaq futures inching 0.08 per cent lower, while S&P 500 futures were flat after Monday’s 0.1 per cent gain.
“Market sentiment remains relatively robust, with implied volatility low, supported by greater confidence in US rate cuts this year,” Kyle Rodda, senior markets analyst at Capital.com, wrote in a note.
At the same time, record highs for metals such as gold and copper “is being pointed to as a signal economic activity is improving globally, and that may be a factor keeping inflation sticky,” Rodda said.
Gold eased 0.3 per cent to about $US2,417 per ounce, after pushing to the cusp of $US2,450 for the first time overnight.
The greenback held its ground against major peers, with the dollar index flat at 104.62 after rebounding from a five-week trough of 104.07 reached on Thursday.
The 10-year Treasury yield was little changed at 4.4355 per cent, after ticking up 1.7 basis points on Monday.
Brent crude futures declined 0.8 per cent to $US83.04 a barrel and US West Texas Intermediate crude eased 0.7 per cent to $US79.16.
Meanwhile, traders snapped up cryptocurrencies following a report that the SEC had abruptly asked exchanges that want to trade ether ETFs to update regulatory filings, boosting bets that approval could come this week.
Bitcoin climbed as high as $US71,957 and ether jumped to $US3,720.80, both hitting levels not seen since April 9.
This post was originally published on Michael West.