Take Five: That most wonderful time of the year
LONDON (Reuters) — Festive cheer has come early to world markets (bar those dollar bulls) on growing certainty that central banks will start slashing interest rates next year.
For sure, key U.S. jobs data will test the exuberance, while Australia's central bank could reinforce a view that rates have peaked.
Here's your week ahead in financial markets from Ira Iosebashvili in New York, Kevin Buckland in Tokyo, Naomi Rovnick and Marc Jones in London and Yoruk Bahceli in Amsterdam.
1/ SANTA'S BEEN
Christmas has come early with global stocks posting their best monthly performance in three years in November and global investment-grade bonds returning almost 4% — the best month on record going back to 1997.
Now, the early Santa rally risks running into a central bank Grinch. Markets price rate cuts as early as the first half of 2024. The U.S. Federal Reserve and the European Central Bank, wary of market euphoria loosening financial conditions, may start to push back.
Whether equities and bonds can rise in tandem next year also feels doubtful. Stocks price in a benign economic scenario of lower borrowing costs and steady growth. Government bonds, which shine in recessions, have been boosted by signs that the impact of previous rate rises is starting to cause pain.
Both cannot be right.
2/ GOLDILOCKS, WELCOME
Will Goldilocks stick around? That's the question investors are pondering as they await the Dec. 8 U.S. jobs report after a rebound that has taken the S&P 500 within spitting distance of a fresh year high.
The data will have to walk a fine line to satisfy the so-called Goldilocks narrative of cooling inflation and resilient growth that has boosted asset prices.
Too strong a number would undercut bets that the Fed will
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