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Shares rise, U.S. Treasury yields drop ahead of Fed minutes' release

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Nov 23, 2022  •  November 23, 2022  •  2 minute read

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NEW YORK — World equities rose while U.S. Treasury yields were lower ahead of the release of the Federal Reserve's meeting minutes that would offer a glimpse on whether officials are likely to soften their stiff monetary policy stance.

Traders are expecting the minutes, which will be published on Wednesday, to provide clues that the Fed is set to end its pace of sharp interest rate hikes in response to a moderation in economic conditions.

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Labor Department data showed on Wednesday that U.S. jobless claims increased more than expected last week while U.S. business activity contracted for a fifth month in November, according to the S&P Global flash U.S. Composite PMI Output Index. "What investors are hoping for is that the Fed acknowledges that since the consumer price index looks like it might be peaking that there's going to be some language that they see a pause on the near-term horizon," said Jordan Kahn, chief investment officer at ACM Funds in Los Angeles, California.

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The MSCI All Country stock index was up 0.8%, while European shares rose 0.62%.

U.S. Treasury yields were trading lower. Benchmark 10-year notes were down to 3.7242% while the yields on two-year notes dropped to 4.4835%.

The yield curve that compares these two bonds widened further into negative territory, to -76.30 basis points. When inverted, that part of the curve is seen as an indicator of an upcoming recession.

"I tend to think that investors that are looking for any sought of hint of a pause are going to be disappointed. I think the Fed is going to keep the message they've been saying for a while, which is that their job isn't done yet and need to bring down demand," Kahn said. "The yield curve is still screaming that the economy is on the precipice of a slowdown," he added.

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On Wall Street, all three major indexes were trading higher, led by gains in technology, consumer discretionary, communication, and industrial stocks.

The Dow Jones Industrial Average rose 0.29% to 34,196.78, the S&P 500 gained 0.56% to 4,025.81 and the Nasdaq Composite added 0.96% to 11,282.14.

Oil prices fell more than 4% as the Group of Seven (G7) nations looked at a price cap on Russian oil that is above where it is currently trading and as gasoline inventories in the United States built more than analysts expected.

Brent futures for January delivery fell 4.2% to $84.65 a barrel, while U.S. crude fell 4.46%, to $77.34 per barrel.

The U.S. dollar fell across the board ahead of the release of the Fed's minutes and new data showing weaker economic conditions. The dollar index fell 0.7%, with the euro up 0.62% to $1.0366.

Gold prices were choppy as the U.S. dollar fell. Spot gold added 0.1% to $1,742.66 an ounce, while U.S. gold futures fell 0.10% to $1,736.50 an ounce.

(Reporting by Chibuike Oguh in New York Editing by Bernadette Baum)

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