GLOBAL MARKETS-Stocks edge lower as dollar, Treasury yields rise with rates in focus

BY Reuters | ECONOMIC | 11/30/23 12:30 PM EST

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Stocks head for biggest monthly gain since Nov 2020

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Treasury yields gain with dollar

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Oil falls after OPEC+ meeting

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

(Updated prices at 11:56 a.m ET/ 1656 GMT)

By Sin?ad Carew and Marc Jones

NEW YORK/LONDON, Nov 30 (Reuters) -

MSCI'S global stock index edged lower on Thursday, the last day of its strongest month since November 2020, while bond yields and the dollar rose as Federal Reserve officials sounded cautious about interest rate cuts even as U.S. consumer spending growth moderated in October.

The Commerce Department said

consumer spending

, which is more than two-thirds of U.S. economic activity, increased 0.2% last month in line with economists' expectations for Personal Consumption Expenditures and after a 0.7% gain in September. The annual inflation increase was the smallest in more than 2-1/2 years signaling cooling demand.

U.S. Treasury yields

climbed even as some investors saw the data as evidence the Fed could cease interest rate hikes. But the benchmark 10-year U.S. Treasury yield was still poised for its biggest monthly drop since August 2011.

The

U.S. dollar

was boosted by month-end buying, despite reinforcement of expectations for a more dovish Fed.

While the closely watched U.S. inflation data was in line with economist expectations, traders appeared to have priced in slower inflation, said John Augustine, chief investment officer at Huntington Private Bank.

"There was no downside surprise in the PCE report this morning. The market was anticipating that there would be a downside surprise, that inflation would come down faster and spending would fall faster than consensus," said Augustine.

Also on Thursday,

Fed policymakers

offered mixed messages with pushbacks on investor bets for a quick pivot to rate cuts while signaling that the U.S. central bank's rate hikes are likely over unless inflation progress stalls.

The Dow Jones Industrial Average rose 300.89 points, or 0.85%, to 35,731.31, the S&P 500 lost 6.57 points, or 0.14%, at 4,544.01 and the Nasdaq Composite dropped 108.33 points, or 0.76%, to 14,150.17.

MSCI's gauge of stocks across the globe shed 0.06%. The index was still on track for a monthly gain of close to 9% after three consecutive months of declines, marking its biggest monthly percentage gain since 2020 when investors reacted to the first COVID-19 vaccine breakthroughs.

The pan-European STOXX 600 index rose 0.51% in sympathy with stocks in Europe as a flurry of weak economic data from Germany, France and Italy bolstered bets for lower rates next year.

Yields in U.S. Treasuries and bonds of other major countries have tumbled in November from peaks of more than a decade in October. U.S. Treasury yields, which usually drive global borrowing costs, have fallen the most since 2008.

Benchmark 10-year notes rose 5.7 basis points to 4.328%, from 4.271% late on Wednesday. The 30-year bond was last up 4.1 basis points to yield 4.4923%, while the two-year note was rose 4.9 basis points to yield 4.6968%, from 4.648%.

In currencies, the dollar index rose 0.515%, with the euro down 0.59% at $1.0903.

The Japanese yen weakened 0.43% versus the greenback at 147.88 per dollar, while Sterling was last trading at $1.2636, down 0.46% on the day.

In energy, oil prices lost ground following a rise of more than 1% earlier in the session after OPEC+ producers agreed to output cuts approaching 2 million barrels per day (bpd) for early 2024.

U.S. crude recently fell 3.01% to $75.52 per barrel and Brent was at $82.77, down 0.4% on the day.

Gold prices fell on Thursday but stayed on track for a second straight monthly gain as expectations the Fed could cut interest rates enhanced the appeal of non-yielding bullion.

Spot gold dropped 0.3% to $2,038.89 an ounce. U.S. gold futures fell 0.44% to $2,038.10 an ounce.

(Reporting by Sin?ad Carew in New York, Marc Jones; Editing by William Maclean and Richard Chang)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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