Volkswacht Bodensee - Stocks grind higher on interest rate expectations

Equities markets went on a tear last month as investors increasingly bet that the US Federal Reserve will begin to cut interest rates in the first half of 2024 thanks to a string of data suggesting its tightening cycle is finally getting price rises under control.

Fed Chair Jerome Powell tried to dampen those expectations at a Friday appearance, saying it is still "premature" to speculate on when the Fed will start cutting interest rates despite the bank's recent progress on inflation.

Despite lifting its benchmark overnight lending rate to a 22-year high and holding it there, inflation remains stuck above the Fed's long-run target of two percent.

"We are prepared to tighten (monetary) policy further if it becomes appropriate to do so," he insisted.

The statement did not dampen sentiment, with Wall Street mostly higher in late morning trading. European markets closed higher and Asia mixed.

Some analysts agree that it is too early for the Fed and other central banks to declare victory over inflation.

"It is still too early to eliminate the tightening bias in the Fed's forward guidance," said Brian Rose at UBS Global Wealth Management.

The latest US data released on Thursday showed the Fed's preferred gauge of inflation slowed further in October, while other recent data pointed to a softening in US consumer spending and the labour market.

Survey data released Friday showed US manufacturing activity contracted for the 13th straight month in November.

Stephen Innes at SPI Asset Management said investors were "recognising the Federal Reserve's successful management of inflation without inducing a severe recession, a concern that was a massive part of the 2023 narrative".

Data this week also showed eurozone inflation came in lower than forecast, giving the European Central Bank room to pause on rates and consider cutting next year.

The outlook was less clear in Britain, where the rate of annual inflation remains the highest among G7 rich nations.

Bank of England officials have indicated that they do not see UK rate cuts any time soon, helping to boost the pound against main rivals.

The ongoing weakness in China's economy remains a problem, even as authorities move to put in place measures to kick-start growth.

"There's still a lot of pessimism -- there's still a wait-and-see attitude," said James Fletcher of Ethos Investment Management.

Oil prices steadied following Thursday's losses that were caused despite a deal between OPEC and Russia-led allies to further cut crude oil output.

The grouping said they would further reduce production in the new year, while Saudi Arabia would also extend an ongoing cut.

But observers said the measures were voluntary and it remained to be seen whether members -- particularly Russia and some African countries who had hit back at initial calls for a cut -- would stick to their pledges.

"The absence of a comprehensive breakdown with only a select number of countries detailing their reduction failed to convince the market," noted analysts at ANZ Group Holdings.

Investors continued to take a shine to gold, which hit its highest price since May at $2,053.30 an ounce, and not far off the record high of $2,075.47 per ounce set in August 2020.

- Key figures around 1630 GMT -

New York - Dow: UP 0.3 at 36,057.39 points

London - FTSE 100: UP 1.0 percent 7,529.35 (close)

Paris - CAC 40: UP 0.5 percent at 7,346.15 (close)

Frankfurt - DAX: UP 1.1 percent at 16,397.52 (close)

EURO STOXX 50: UP 0.8 percent at 4,415.51 (close)

Tokyo - Nikkei 225: DOWN 0.2 percent at 33,431.51 (close)

Hong Kong - Hang Seng Index: DOWN 1.3 percent at 16,830.30 (close)

Shanghai - Composite: UP 0.1 percent at 3,031.64 (close)

Euro/dollar: DOWN at $1.0866 from $1.0889 on Thursday

Pound/dollar: UP at $1.2664 from $1.2621

Dollar/yen: DOWN at 147.23 yen from 148.14 yen

Euro/pound: DOWN at 85.77 pence from 86.22 pence

Brent North Sea crude: UP 0.2 percent at $81.00 per barrel

West Texas Intermediate: UP 0.3 percent at $76.16 per barrel

burs-rl/giv

M.Schneider--VB