Drop in yields is fuelling gains on US and European indices
European indices as well as US index futures are trading higher today. While there were no specific news this morning to justify the jump on equity markets, gains can be reasoned with a pullback in US yields. A drop in yields is, in turn, driven by dovish speeches from Fed members. Fed Waller, who is one of the biggest Fed hawks, said yesterday that policy is in good position to return inflation to 2% target, while Fed Bowman wasn't in favor of delivering another rate increase at the December meeting.
Such comments are another confirmation of what is known already, but officials do not want to admit it - Fed is done hiking rates. A potential for easing of policy rates as soon as during the first half of 2024 is what is driving yields lower and equities higher today.
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Taking a look at DE30 chart at D1 interval, we can see that the index broke above the 16,050 pts resistance zone today, confirming the ongoing upward trend. Index climbed to the highest levels in 4 months! DE30 is trading in a steep upward channel since the end of October, and a break above the aforementioned 16,050 pts resistance paves the way towards all-time highs in the 16,550 pts area. A short-term resistance to watch can be found in the 16,200 pts area, where the 78.6% retracement of the downward move launched at the turn of July and August 2023 can be found.
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