Dollar Weakens Further; Microsoft Rises on New AI Leadership: Market Overview

November 20, 2023 at 11:01 am - by Ashlee Vogenthaler

European markets mixed, Bayer falls sharply; Italy upgraded by Moody’s

Microsoft appoints Sam Altman to head new AI division The U.S. dollar continued to weaken, hitting its lowest point since August, fueled by beliefs that the Federal Reserve might be close to ending its interest rate increases.

Market predictions suggest roughly a 30% likelihood of a Federal Reserve rate reduction in March, influenced by recent mild inflation figures. Investors are anticipating the upcoming release of the Federal Reserve’s last meeting minutes on Tuesday, while U.S. stock futures remain stable following a three-week surge that brought the S&P 500 to its highest in 11 weeks. Microsoft Corp. (MSFT) saw a pre-market jump of up to 2.7% after recruiting OpenAI co-founders Sam Altman and Greg Brockman for its in-house AI team.

U.S. Treasury yields rose slightly before a 20-year bond auction. The Stoxx Europe 600 index showed variability, impacted by various negative corporate updates.

Bayer AG experienced a significant drop following the halt of a major drug trial and a legal setback related to its Roundup herbicide. U.S. counterpart Bristol-Myers Squibb Co. also fell over 4% in pre-market trading.

UK-based Ashtead Group Plc saw a sharp decline after revising its revenue projections downward. Swiss bank Julius Baer Group Ltd. dropped as much as 12%, citing a potential profit drop due to increasing bad-loan provisions. Positive Shift for Italian Banks Italian banks saw an upswing following Moody’s Investors Service’s revision of Italy’s debt outlook to stable, alleviating fears of an imminent downgrade to junk status. Italy’s bond yield gap with Germany narrowed. However, escalating energy costs might complicate the European inflation and interest rate landscape. Natural gas prices surged following the seizure of a ship in the Red Sea by Iran-backed Houthi rebels, raising concerns about the impact of the Israel-Hamas conflict on key fuel transport routes.

European gas futures increased by up to 6.9%, also influenced by colder weather forecasts and rising crude oil prices before an upcoming OPEC+ meeting.

The European Central Bank might need to hike interest rates again if market expectations of easing monetary policy contradict the bank’s objectives, said ECB Governing Council member Pierre Wunsch. He was the first among several ECB officials scheduled to speak this week. Political Shift in Argentina In Argentina, libertarian candidate Javier Milei won over Economy Minister Sergio Massa in the presidential runoff. This led to a rally in Argentine bonds, with emerging-market currencies and stocks also gaining.

Conversely, Zambia’s eurobonds dropped after the country announced its inability to implement a bondholder restructuring agreement due to lack of unanimous creditor support. Securities due in 2027 fell sharply.

The offshore yuan strengthened after the People’s Bank of China set a robust daily reference rate for the currency, marking its strongest since August. Chinese commercial banks kept their benchmark lending rates unchanged, aligning with the central bank’s recent decision to maintain policy rates and focus on alternative stimulus support methods.

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