Business

Shares hold gains as rate cuts eyed for new year

An absence of major news has not stopped investors from ramping up bets on rapid-fire rate cuts next year

Traders work on the floor of the New York Stock Exchange on the first days back since the Christmas holiday. US stocks rose marginally in light trading on the penultimate trading day of 2023. Photograph: Spencer Platt/Getty Images

Thu Dec 28 2023 - 17:25

Shares around the world gained ground on Thursday as expectations of interest rate cuts stretched a rally in US stocks, while benchmark US treasuries and the dollar held near five-month lows.

The MSCI world equity index, which tracks shares in 47 countries, gained 0.34 per cent, with European shares steady, just shy of a 23-month high hit two weeks ago, and were on course for gains of about 13 per cent this year.

“Right now, we really do not want to step in front of Santa’s gift-laden sleigh,” Scott Wren, senior global market strategist at Wells Fargo Investment Institute, wrote in a note. “It appears the rally could very well put the S&P 500 Index at or very near an all-time record high as we close out the year.”

An absence of big news has not stopped investors from ramping up bets on rapid-fire rate cuts next year from the Federal Reserve.

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“The rapid decline in inflation is likely to lead the Fed to cut early and fast to reset the policy rate from a level that most participants will likely soon see as far offside,” analysts at Goldman Sachs wrote in a note.

“We expect three consecutive 25 basis point cuts in March, May, and June, followed by one cut per quarter until the funds rate reaches 3.25-3.5 per cent in 2025 Q3. Our forecast implies five cuts in 2024 and three more cuts in 2025.”

Dublin

Dublin’s Iseq index dropped by 1 per cent on back of a poor day for financials. AIB, Bank of Ireland and Permanent TSB all lost ground, by 1.8-2.6 per cent respectively. Other Iseq notables Kingspan, Dalata and Flutter also fell as investors treaded water to see what the new year brings. Ryanair traded roughly flat at €19.26 as oil prices fell amid ongoing Red Sea transport disruption and further violence in the Middle East. Food groups Glanbia and Kerry were marginally down at €15.08 and €78.08 respectively. Packaging giant Smurfit Kappa fell 1.5 per cent to €35.80.

London

Stock prices in London closed down though the FTSE 100 was still on track to deliver a gain of more than 3 per cent for 2023.

“Oil prices fell as global shipping giants prepared to resume navigation through the Red Sea despite ongoing missile attacks from Houthi rebels,” SPI Asset Management analyst Stephen Innes said. “The decision to resume operations reflects a calculated risk, betting on the success of a new multinational maritime task force, Prosperity Guardian, commissioned to safeguard the region,” he said.

“On Wednesday, Danish shipping company Maersk revealed its intention to resume scheduling vessels for the Suez Canal via the Red Sea in the coming weeks following a temporary pause,” he added.

The FTSE 100 index closed down just 2.21 points at 7,722.74. So far this year, the FTSE 100 has added 3.6 per cent. The FTSE 250 fell only 1.59 points to 19,719.16, though the AIM All-Share rose 0.63 of a point, 0.1 per cent, at 763.66.

Europe

European shares had a mixed afternoon as investors remained optimistic that central banks would soon cut borrowing costs. The Stoxx Europe 600 index was down 0.2 per cent at 477.81, falling back after recent gains.

Optimism about prospects for interest-rate cuts in 2024 helped ensure post-Christmas gains but uncertainties remain amid the faltering economic outlook.

European Central Bank governing council member Robert Holzmann said there was “no guarantee” of interest-rate cuts in 2024, Bloomberg News reported on Thursday. Germany’s Dax fell 0.2 per cent while France’s CAC 40 lost 0.5 per cent.

New York

US stocks rose marginally in light trading on the penultimate trading day of 2023, while the benchmark S&P 500 hovered around its all-time high on hopes of early interest rate cuts next year.

Eight of the 11 S&P subindexes were trading in the green, with the healthcare sector leading the gains, advancing 0.5 per cent

The energy index slid 0.4 per cent after oil prices fell about 1 per cent on Thursday as concerns eased about shipping disruptions along the Red Sea route, even as tensions in the Middle East continue to fester.

Wall Street’s three main indexes oscillated between modest gains and losses in the previous session on little market-moving news but finished higher for the day. They are on course for monthly, quarterly, and annual gains. – Additional reporting: Reuters

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