World shares mixed, gold hits all-time high above $2,100

MSCI's broadest index of world shares added 0.1 per cent after reaching a four month high, while Europe's STOXX 600 benchmark dropped 0.1 per cent

Global shares were mixed on Monday, while gold soared to all-time highs above $2,100 at the beginning of a busy week for economic data.

MSCI's broadest index of world shares added 0.1 per cent after reaching a four month high in earlier trading. However, Europe's STOXX 600 benchmark dropped 0.1 per cent.

European retailers enjoyed an early "Santa Rally" as the index of top retailer shares traded 1.1 per cent higher to its highest since March 2022. But any early holiday cheer was offset by losses in the basic resources index, which dropped 1.7 per cent, undermined by lower copper prices.

Attacks on commercial vessels in the Red Sea on Sunday risked reigniting investor concerns about a widening of the war in the Middle-East, potentially complicating the outlook for a rally that saw U.S. stocks hit a new closing high for the year last week.

Wage growth still sits above the Fed's target, said Bruno Schneller, MD at INVICO Asset Management. If upcoming data aligns with expectations, it could mean the end of rate hiking this year and a shift to cuts next year.

Considering the upcoming 2024 U.S. presidential election, the Fed will likely avoid actions that could be seen as favouring any candidate, leading us to expect no major surprises and a continued data-dependent approach from the Fed, said Schneller.

Futures now imply a 60 per cent possibility the Fed will ease as soon as March, up from 21 per cent a week ago, and are pricing in nearly 135 bps of cuts for all of 2024.

The turnaround in Treasuries has been nothing short of astonishing as two-year yields dropping 41 basis points in just a week, the best performance since the mini-crisis in the U.S. bank sector in March.

So it was no surprise that some profit-taking occurred on Monday and nudged yields on 10-year notes up to 4.25 per cent, but still well short of the October top of 5.02 per cent.