By Wayne Cole and Amanda Cooper
SYDNEY/LONDON (Reuters) -Global stocks edged up on Monday ahead of a week crammed with U.S. economic data that will be pivotal in setting expectations for interest rates, although heightened political uncertainty kept any new-year enthusiasm in check.
In China, the yuan hit a 16-month low and blue-chip stocks traded at their weakest since late September, prompting the country’s stock exchanges and central bank to defend its falling markets and soothe investor concern about the impact on the world’s second biggest economy of Donald Trump’s imminent return to the White House.
Meanwhile, reports on Monday suggested embattled Canadian prime minister Justin Trudeau might announce his resignation later in the day.
Markets seemed to have priced it in and might welcome an election to clarify matters, leaving the U.S. dollar down 0.4% at 1.4393 to its Canadian counterpart.
The MSCI All-World index rose 0.1%, reflecting a slightly patchy performance in Europe, where the STOXX 600 was up 0.1%, while Germany’s DAX – 2024’s top-performing major European index, was up 0.2%.
U.S. stock index futures were up 0.1-0.3%, suggesting an extension to Friday’s rally in the benchmark indices.
“We start the new trading week, and new trading year, with stocks having enjoyed a strong Friday rally, where both the S&P 500 and Nasdaq 100 erased all of the declines seen a day prior. A choppy start, then, albeit in what were still thin trading conditions, with S&P volumes around 20% below the 20-day average,” Pepperstone senior research strategist Michael Brown said.
Adding to the sense of caution was anticipation of Friday’s U.S. December employment report, where analysts expect a rise of 150,000 in the number of workers on nonfarm payrolls and for unemployment to hold at 4.2%
These will be preceded by data on ADP hiring, job openings and weekly jobless claims, along with surveys on manufacturing, services and consumer sentiment.
Anything upbeat would support the case for fewer rate cuts from the Federal Reserve, and markets have already scaled back expectations to just 40 basis points for 2025.
Investors will also have a chance to get some insight into the thinking of Fed officials this week, with minutes from the central bank’s last meeting on Wednesday and a number of top policy makers speaking including influential Fed Governor Christopher Waller due to speak as well.
Inflation figures from Germany on Monday and for the euro zone on Tuesday may help refine the outlook for more rate cuts from the European Central Bank. Traders currently expect the ECB to deliver four quarter-point cuts this year.
YIELDS CRAWL HIGHER
In fixed income, U.S. Treasury yields rose for a second day to 4.624%, a whisker away from last week’s eight-month high at 4.641%. Yields rose almost 80 basis points in the fourth quarter, with over 30 bps in December alone.
Investor appetite will be tested this week by the sale of $119 billion in new three-, 10- and 3-year Treasuries.
“(The) key level to watch in U.S. 10-year notes remains the May 2024 high at 4.64%, a break above which may signal an extension towards 4.75%,” analysts at Saxo Bank said.
High yields have given the dollar a natural source of support. The dollar index, which rose 0.9% last week, was down 0.3% on Monday, largely as a function of gains in the euro and sterling.
The euro rose 0.25% on the day to $1.03365, just ahead of resistance around $1.0340, while the pound clawed back some ground after hitting eight-month lows last week to trade up 0.4% at $1.2472.
The Chinese yuan finished Monday’s domestic session at 7.3296 per dollar, its weakest since September 2023.
Oil had found support from colder weather in Europe and the United States, with a winter storm bringing snow, ice and freezing temperatures to a broad swath of the U.S. on Sunday.
But early gains faded and Brent fell 0.4% to $76.22 a barrel, while European natural gas prices fell 1% to 49.10 euros per megawatt hour (MWh), near 14-month highs.
