# Shares steady, dollar dips as US holiday lifts rates gloom
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-20
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Global Shares Rise Amid US Holiday: Fed Meeting Minutes
Meta Description: Discover how global shares respond to U.S. market holiday, the Federal Reserve meeting, and inflation data impact on interest rates.
URL: https://financedigest.com/shares-steady-dollar-dips-as-us-holiday-lifts-rates-gloomhtml

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By Amanda Cooper

LONDON (Reuters) -Global shares inched up on Monday as a U.S. holiday tempered volatility ahead of minutes of the latest Federal Reserve meeting even though [data on core inflation](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") has raised the risk of interest rates heading higher for longer.

The dollar, which is this month on [track for its largest one-month rise since](https://www.financedigest.com/the-nasdaq-100-on-track-to-have-its-best-week-since-march-2010.html "The Nasdaq 100 On Track to Have its Best Week Since March 2010") September, eased a touch, reflecting a retreat in risk aversion among investors.

With U.S. markets shut for the [Presidents’ Day](https://www.financedigest.com/over-a-third-of-uk-people-think-thomas-whitmore-from-independence-day-will-be-joined-by-donald-trump-in-disneys-hall-of-presidents.html "Over a third of UK people think Thomas Whitmore from Independence Day will be joined by Donald Trump in Disney’s Hall of Presidents") holiday, non-U.S. assets got some respite from the relentless pressure of last week.

The MSCI All-World index rose 0.2%, helped by modest [gains in Europe, where the STOXX 600 rose 0.1%, as gains in mining shares](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") offset a decline in the tech sector.

A surge [higher in both stock](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease") and bond prices in the first six weeks of the year came to a screeching halt, after a flurry of U.S. data suggested the world’s largest economy is holding up far better than expected, which [means interest rates](https://www.financedigest.com/interest-rates-are-cut-to-an-all-time-low-what-will-this-mean-for-small-businesses.html "Interest rates are cut to an all-time low. What will this mean for small businesses?") will have to rise further and take far longer to decline.

“Until recently, the market debate was all about soft-landing or hard-landing, recession or no recession. However, the real world is now not playing ball, prompting [investors to come](https://www.financedigest.com/bargain-hunting-comes-to-the-fore-as-investors-brace-for-brexit.html "Bargain-hunting comes to the fore as investors brace for Brexit") up with the idea of ‘no-landing’ at all,” Kingswood chief economist Rupert Thompson said.

This new concept of ‘no-landing’ is not really that helpful, not least because, as any airline pilot will testify, there is ultimately either a [soft or hard landing](https://www.financedigest.com/stocks-dollar-gain-on-soft-landing-hopes.html "Stocks, dollar gain on soft landing hopes"). Arguably, the [day of reckoning has just been postponed until the second half of the year](https://www.financedigest.com/explainer-international-womens-day-date-history-and-this-years-theme.html "Explainer-International Women’s Day: date, history and this year’s theme") with any U.S. recession now looking more likely to occur then, if one occurs at all,” he said.

Having dismissed warnings from U.S. policymakers that inflation is too high and too persistent for comfort, investors are starting to accept they may have been overly optimistic in their assumptions.

PEAK-A-BOO

Money [markets show investors expect](https://www.financedigest.com/hydrolyzed-collagen-market-sales-is-expected-to-clock-high-growth-rate-by-forecast-2028.html "Hydrolyzed Collagen Market Sales Is Expected To Clock High Growth Rate By Forecast 2028") U.S. rates to peak at around 5.3% by July, with a quarter-point [rate cut possibly](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike") materialising by December.

This marks a massive shift from expectations at the start of February for a peak below 5% by July and the first rate cut coming in just [weeks later](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week").

It might be premature to believe that recession is off the table now, when Fed will have done 500bp+ of tightening in a year, and the impact of monetary policy tended to be felt with a lag on the real economy, of as much as 1-2 years,” JPMorgan head of global and [European equity](https://www.financedigest.com/procurementin-european-private-equity-investment-adding-value-to-the-boardroom.html "Procurement in European private equity investment – adding value to the boardroom.") strategy Mislav Matejka said.

“The damage has been done, and the fallout is likely still ahead of us,” he said.

S&P 500 and Nasdaq futures fell 0.2-0.3%. The S&P touched a two-week low on Friday.

It’s the most [aggressive Fed](https://www.financedigest.com/stocks-tumble-dollar-rallies-as-soaring-u-s-inflation-implies-an-aggressive-fed.html "Stocks tumble, dollar rallies as soaring U.S. inflation implies an aggressive Fed") tightening in decades and U.S. retail sales are at all-time highs; unemployment at 43-year lows; payrolls up over 500k in [January and CPI/PPI inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC") reaccelerating,” analysts at BofA noted. “That’s a Fed mission very much unaccomplished.”

The release on Wednesday of the [minutes of the Fed’s](https://www.financedigest.com/dollar-jumps-euro-dips-before-fed-minutes.html "Dollar jumps, euro dips before Fed minutes") latest meeting may offer more insight into policymakers’ deliberations, but could have less impact than usual because the meeting took place after January’s bumper payrolls and retail sales reports.

In addition, the [Fed’s preferred measure of inflation](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week"), the core personal consumption expenditures index (PCE), lands on Friday. It is expected to haven risen by 0.4% in January, the biggest gain in five months, while the annual pace is [forecast to have slowed](https://www.financedigest.com/michael-kors-owner-capri-cuts-forecasts-as-demand-slows-shares-plunge-20.html "Michael Kors owner Capri cuts forecasts as demand slows, shares plunge 20%") to 4.3%.

The [dollar nudged lower against a basket of major currencies](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades"), but was noticeably down against so-called commodity currencies, including the Australian dollar, which rose 0.5% and the Canadian dollar, which gained 0.1%.

Brent crude futures, which last week shed nearly 4%, rose 0.9% to $83.74 a barrel, while copper gained 1.7% to trade around $9,143 a tonne. Both are highly sensitive to the health of the Chinese economy, which is resuming more normal [activity after three years of COVID](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") lockdowns.

China’s offshore yuan rose 0.1% to around 6.865 to the [dollar after Beijing kept interest rates steady as expected](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected"), having poured liquidity into the banking system in recent days.

The earnings season continues this week with major retailers Walmart and Home Depot [set to offer updates on the health of the consumer](https://www.financedigest.com/factbox-how-far-are-uk-energy-bills-set-to-rise-and-what-help-are-consumers-getting.html "Factbox-How far are UK energy bills set to rise and what help are consumers getting?").

(Additional reporting by Wayne Cole in Sydney; Editing by Shri Navaratnam, Christian Schmollinger, Philippa Fletcher, Christina Fincher and Barbara Lewis)


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