Dollar Set for Worst Month in a Year, Yields Hold

The dollar headed for its steepest monthly drop in a year while Treasuries steadied on bets the Federal Reserve is almost done with its interest-rate hiking cycle, Bloomberg reported.

The Stoxx 600 fell 0.3% and US futures also pointed toward a weaker open. Argenx SE shares sank as much as 17% after the Dutch biotech said preliminary results from a study suggest its only medicine failed in a trial for a rare bleeding disorder. Gold held near the highest level since May and oil snapped three days of declines.

Signs of slowing inflation and measured jobs growth in the US have unleashed a rally that sent yields tumbling from their highest in more than a decade. Wall Street stock pickers are also turning more upbeat about the outlook for next year as expectations of a soft landing for the economy mount.

The July rate hike was probably the Fed’s last, according to Liz Ann Sonders, chief investment strategist at Charles Schwab.

“But I always say, be careful what you wish for,” she said on Bloomberg Television. “If the market is right in expecting that rate cuts could start maybe even at the end of the first quarter, in the first half, that would require to some degree a weaker economic and labor market backdrop than what we’re seeing right now.”

More than 60% of respondents in the latest MLIV Pulse survey expect stocks to provide better returns than bonds over the next month. That’s the highest level of excitement about equities that the survey registered since the question about the two assets was first asked in August 2022.

Traders will be watching another batch of economic data this week, including the Fed’s preferred measure of underlying inflation. US sales of new houses fell in October after a downward revision to the prior month as decades-high mortgage rates weighed on demand. The Fed Bank of Dallas manufacturing index for November came in softer than expected.

Elsewhere, gold was little changed, hovering near the highest level since May, supported by a slump in Treasury yields and bets that the Fed will start cutting interest rates. Oil snapped three days of declines as the market weighs the possibility of deeper output cuts from OPEC+ against signs supply is running ahead of demand.