NEW YORK: Bond prices jumped and the dollar eased on Friday, Oct 29 after data showed the U.S. economy grew in the third quarter but not briskly enough to alter expectations of Federal Reserve monetary easing next week.
U.S. Treasuries gained after the government's estimate of gross domestic product was in line with analysts' forecasts of a 2.0 percent rise. But a bigger-than-expected gain in business inventories pointed to underlying weakness in the U.S. economy.
Trading was subdued in anticipation of a Fed announcement next Wednesday and the outcome of U.S. elections on Tuesday, with polls indicating Republicans will wrest control of the U.S. House of Representatives.
Treasuries also rallied as the GDP reported showed core inflation under 1 percent, which supported expectations the Fed would try to support the economy by buying assets.
The 30-year bond outperformed shorter maturities, gaining 38/32 in price to yield 3.99 percent. The benchmark 10-year note rose 18/32 in price to yield 2.60 percent.
"We're going to be in a prolonged period of relatively low interest rates," said James Sarni, managing principal and senior portfolio manager at Los Angeles-based Payden & Rygel, with $55 billion in assets under management.
Fed policymakers are expected to announce new bond purchases to push borrowing costs lower and energize a sluggish recovery when their two-day meeting ends on Wednesday. A recent Reuters poll of economists found they expected the Fed to buy between $80 billion and $100 billion a month.
The dollar index, a gauge of its performance against six major currencies, edged lower while the Japanese yen hovered near its record peak in 1995 of 79.75 yen to the dollar.
Investors bet the Bank of Japan will not intervene to weaken the yen before the Fed's announcement next week. The dollar slipped 0.65 percent at 80.47 against the yen and the Dollar Index was down 0.18 percent at 77.17.
ANEMIC U.S. GROWTH
Global stocks edged higher, with European shares posting a second consecutive monthly gain, but Wall Street trading was flat after the GDP report met analysts' forecasts.
MSCI's all-country world index rose 0.1 percent.
Investors are betting volatility will rise and have hedged against unexpected outcomes from the Fed meeting and the elections. The CBOE Volatility Index rose 13.1 percent for the week.
"There's no getting around how big of a week next week is, and it could be an inflection point either up or down," said Max Bublitz, chief investment strategist at SCM Advisors in San Francisco.
The Dow Jones industrial average gained 4.54 points, or 0.04 percent, at 11,118.49. The Standard & Poor's 500 Index slid 0.52 point, or 0.04 percent, at 1,183.26. The Nasdaq Composite Index was up 0.04 point at 2,507.41.
Gold rose 1 percent, setting a 10-day high, as the weaker dollar prompted investors to buy ahead of the Fed meeting.
News that security officials in Britain and Dubai intercepted parcel bombs being sent from Yemen to the United States aboard cargo flights shook investors, also prompting gold buying.
U.S. gold futures for December delivery settled up $15.10 at $1,357.60.
Oil prices fell on the tepid U.S. economic data, while end-of-month positioning and profit-taking, along with the expiration on Friday of U.S. November refined oil products contracts, also were cited as factors.
U.S. crude for December delivery settled down $1.08 at $81.10 a barrel. But oil posted its second straight monthly gain and the first monthly close above $80 a barrel since April.
In London, ICE Brent December crude settled down 44 cents at $83.59 a barrel.
The euro was down 0.06 percent at $1.3923.
Japan's Nikkei share average fell 1.7 percent to a one-month low while the MSCI index of Asia Pacific stocks outside Japan slipped 0.3 percent. - Reuters
U.S. Treasuries gained after the government's estimate of gross domestic product was in line with analysts' forecasts of a 2.0 percent rise. But a bigger-than-expected gain in business inventories pointed to underlying weakness in the U.S. economy.
Trading was subdued in anticipation of a Fed announcement next Wednesday and the outcome of U.S. elections on Tuesday, with polls indicating Republicans will wrest control of the U.S. House of Representatives.
Treasuries also rallied as the GDP reported showed core inflation under 1 percent, which supported expectations the Fed would try to support the economy by buying assets.
The 30-year bond outperformed shorter maturities, gaining 38/32 in price to yield 3.99 percent. The benchmark 10-year note rose 18/32 in price to yield 2.60 percent.
"We're going to be in a prolonged period of relatively low interest rates," said James Sarni, managing principal and senior portfolio manager at Los Angeles-based Payden & Rygel, with $55 billion in assets under management.
Fed policymakers are expected to announce new bond purchases to push borrowing costs lower and energize a sluggish recovery when their two-day meeting ends on Wednesday. A recent Reuters poll of economists found they expected the Fed to buy between $80 billion and $100 billion a month.
The dollar index, a gauge of its performance against six major currencies, edged lower while the Japanese yen hovered near its record peak in 1995 of 79.75 yen to the dollar.
Investors bet the Bank of Japan will not intervene to weaken the yen before the Fed's announcement next week. The dollar slipped 0.65 percent at 80.47 against the yen and the Dollar Index was down 0.18 percent at 77.17.
ANEMIC U.S. GROWTH
Global stocks edged higher, with European shares posting a second consecutive monthly gain, but Wall Street trading was flat after the GDP report met analysts' forecasts.
MSCI's all-country world index rose 0.1 percent.
Investors are betting volatility will rise and have hedged against unexpected outcomes from the Fed meeting and the elections. The CBOE Volatility Index rose 13.1 percent for the week.
"There's no getting around how big of a week next week is, and it could be an inflection point either up or down," said Max Bublitz, chief investment strategist at SCM Advisors in San Francisco.
The Dow Jones industrial average gained 4.54 points, or 0.04 percent, at 11,118.49. The Standard & Poor's 500 Index slid 0.52 point, or 0.04 percent, at 1,183.26. The Nasdaq Composite Index was up 0.04 point at 2,507.41.
Gold rose 1 percent, setting a 10-day high, as the weaker dollar prompted investors to buy ahead of the Fed meeting.
News that security officials in Britain and Dubai intercepted parcel bombs being sent from Yemen to the United States aboard cargo flights shook investors, also prompting gold buying.
U.S. gold futures for December delivery settled up $15.10 at $1,357.60.
Oil prices fell on the tepid U.S. economic data, while end-of-month positioning and profit-taking, along with the expiration on Friday of U.S. November refined oil products contracts, also were cited as factors.
U.S. crude for December delivery settled down $1.08 at $81.10 a barrel. But oil posted its second straight monthly gain and the first monthly close above $80 a barrel since April.
In London, ICE Brent December crude settled down 44 cents at $83.59 a barrel.
The euro was down 0.06 percent at $1.3923.
Japan's Nikkei share average fell 1.7 percent to a one-month low while the MSCI index of Asia Pacific stocks outside Japan slipped 0.3 percent. - Reuters
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