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U.S. equity futures nudged higher Monday while the dollar and Treasury yields steadied, as investors brushed past Federal Reserve officials’ warnings about their rate-cut exuberance.
Last week’s dovish assessment of the Fed’s rate path, taken from its Summary of Economic Projections, calls for around three reductions in the benchmark federal funds rate next year.
That view meets, at least in part, bullish rate bets on Wall Street that have pushed Treasury yields lower and stocks higher for much of the past two months.
Fed officials have tried to push back on that assumption, with Cleveland Fed President Loretta Mester telling London’s Financial Times that markets are “a little bit ahead’ of the central bank’s projections.
She added that the central bank is focused more on “how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%” than on the timing of rate cuts.
Mester’s comments followed a similar warning from New York Fed President John Williams on Friday, who told CNBC that it was “just premature to be even thinking about” about rate cuts.
Goldman Sachs, meanwhile, is forecasting three consecutive rate cuts, starting in March, while CME Group’s FedWatch sees rates falling to between 3.75% and 4% by the end of next year.
In the bond market, benchmark 10-year note yields, which had their biggest five-day decline since 2010 last week, were marked 2 basis points lower at 3.898% while 2-year notes were holding near mid-May lows at 4.419%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was little changed at 102.554.
On Wall Street, stocks look set for a modestly firmer open heading into the final full week of the trading year. Futures contracts tied to the S&P 500, which is up 22.9% for the year, were priced for a 4 point opening bell gain.
The Dow Jones Industrial Average, meanwhile, is called 52 points higher while the tech-focused Nasdaq is set for a 13 point-opening bell dip.
In overseas markets, Europe’s Stoxx 600, fresh off a 10-week winning streak, the longest since April, was marked 0.11% lower. The move followed a softer-than-expected reading of German business sentiment for the final month of the year and hawkish statements from ECB policymakers.
Overnight in Asia, stocks were muted, with the MSCI ex-Japan benchmark falling 0.42% into the final hours of trading and the Nikkei 225 ending 0.64% lower in Tokyo ahead of tomorrow’s Bank of Japan rate decision.
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