By Chris Prentice and Naomi Rovnick
NEW YORK/LONDON (Reuters) -Major Wall Street indexes notched weekly gains on Friday, as global equities drifted toward their biggest one-month rally since November 2020 during a shortened, muted trading session following the U.S. Thanksgiving holiday.
Oil futures traded steady ahead of next week's OPEC+ meeting, which could bring some kind of agreement on output cuts in 2024.
Gold futures finished higher as the dollar index slipped against a basket of currencies on Friday.
Data showed U.S. business activity held steady in November, but employment in the private sector declined.
MSCI's index of global shares added 0.12% and headed for a monthly gain of 8.7% after investors grew increasingly confident that U.S. interest rates have peaked, with the market narrative shifting to the timing of cuts..
The Dow Jones Industrial Average rose 117.12 points, or 0.33%, to 35,390.15, the S&P 500 gained 2.72 points, or 0.06%, at 4,559.34 and the Nasdaq Composite dropped 15.00 points, or 0.11%, to 14,250.86.
Europe's benchmark STOXX 600 gained 0.4% on Friday to close higher for a second straight week, while investors assessed data from Germany for clues about the country's economic outlook.
Germany's DAX closed up 0.2%.
In geopolitical news, Israel and Hamas started a four-day ceasefire on Friday and the militants released a group of hostages, the first sign of detente in the near seven-week war.
The U.S. central bank has raised benchmark borrowing costs by more than five percentage points since March 2022 as part of a global monetary tightening cycle.
"Weaker (economic) data and weaker inflation in the U.S. has given markets hope you are going to start to see rate cuts," said Peter Doherty, investment management director at Arbuthnot Latham in London.
"But the debate is whether we should be taking profits now," he added, given the potential for a "re-acceleration of U.S. growth," after the world's largest economy confounded recession forecasts throughout 2023.
Despite optimism having surged across global markets this month, there may also be a lull ahead as investors position their portfolios for 2024, some analysts said.
U.S. 10-year Treasury yields, which set the tone for borrowing costs worldwide, rose to 4.485%. They were still comfortably below the 5% milestone reached last month.
Minutes from the latest Fed policy meeting signaled there would not be more hikes unless progress against taming inflation faltered.
S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, was unchanged at 50.7 as a modest rise in services sector activity offset a contraction in manufacturing. A reading above 50 indicates expansion in the private sector.
The lack of strong order growth resulted in businesses shedding workers, with the survey's employment index saw its first contraction since June 2020. An easing labor market will aid the Fed's fight against inflation.
Euro zone government bond yields ticked higher, reflecting pushback from European Central Bank officials against speculation they were ready to start thinking about cutting rates.
ECB policymaker Robert Holzmann, seen as a policy hawk, reiterated that another rate hike was possible, after Belgian policymaker Pierre Wunsch warned about "too optimistic" bets on future cuts.
Germany's 10-year government bond yield, the benchmark for the euro area, rose 3 basis points to a 1-1/2-week high.
In the UK, where the Bank of England is now viewed as having to keep interest rates at a 15-year high until late next summer, sterling rose to the highest since early September.
In Asia, Japan's Nikkei share index climbed, charging back toward a 33-year high hit on Monday.
Data on Friday showed that Japan's core consumer inflation picked up slightly in October, although by less than expected.
Mainland China's CSI 300 index dropped 0.7% to its lowest close in more than a month, reflecting investor concern about a property slump and sluggish economy.
On Friday, foreign investors sold a net 6.2 billion yuan ($859.8 million) of mainland Chinese shares via the stock connect channel, the biggest daily outflow in more than a month.
Oil prices were steady after tumbling more than 1% on concerns over a delayed OPEC+ meeting. Brent crude futures settled down 1.03% at $80.58 per barrel, as U.S. prices finished down 2.02% at $75.54.[O/R]
Gold futures settled 0.5% higher at $2,003. Spot prices gained 0.48% to $2,001.36 an ounce. [GOL/]
($1 = 7.2111 Chinese yuan renminbi)