LONDON :European shares were holding near a 5-1/2 week high on Tuesday while the dollar languished near its lowest in two-and-a-half months on expectations the U.S. Federal Reserve is likely done with interest rate hikes.

The pan-European STOXX 600 index was little changed on the day at 455.98 points. The index is up over 5 per cent this month and on track for its biggest monthly gain since January.

Germany’s DAX was eking out a 0.15 per cent gain, while France’s CAC 40 and Britain’s FTSE 100 were a touch softer.

With the economic calendar bare in Europe, Wall Street futures were trading lower before the minutes of the Federal Reserve’s last meeting, which investors will use to gauge which way rates are headed, and also on earnings from Nvidia, which hit a record high on Monday.

On Monday, Wall Street’s three major stock averages rose, with Nasdaq’s 1 per cent rally leading the charge as heavyweight Microsoft hit a record high after it hired Sam Altman, who headed OpenAI until he was ousted late last week.

Stock markets have broadly rebounded in November as a flurry of data that showed U.S. inflation might be easing has spurred bets that the Fed is done with monetary tightening and rate cuts may be on the way next year.

Traders have nearly fully priced in the likelihood that the Fed will keep interest rates unchanged in December, and some have started pricing in rate cuts as soon as March, according to the CME Group’s FedWatch tool.

“The rapid drop in inflation, both in the U.S. and Europe, has been incredibly positive and quite substantial,” said Hani Redha, portfolio manager, global multi-asset at PineBridge Investments.

“Inflation relief and then loosening of financial conditions has provided relief for risk assets.”

Trading is expected to be muted for much of the week, ahead of Thursday’s U.S. Thanksgiving holiday and a sparse data calendar for the week.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.6 per cent higher having earlier touched 511.05, the highest since Sept. 5. Japan’s Nikkei closed lower but remained close to the 33-year high it touched on Monday. The index is up roughly 28 per cent this year, making it the best performing stock market in Asia.

The MSCI World Equity Index gained 0.1 per cent.

Treasury yields were lower in the wake of solid bidding in the $16-billion sale of 20-year Treasury bonds on Monday that suggested the market still anticipates inflation will decelerate and the Fed will cut rates next year.

The yield on 10-year Treasury notes was down 1 basis point to 4.41 per cent, while the yield on the 30-year Treasury bond was down 3 basis points to 4.547 per cent.

Lower yields kept the dollar on the back foot, with the dollar index, which measures the U.S. currency against a basket of six major currencies, down 0.1 per cent at 103.30, having touched near three-month low of 103.17 earlier in the session.

The Japanese yen strengthened to 147.155 per dollar, lifting further away from the one-year low of 151.92 it touched last week.

China’s yuan rose to its highest since July in both the offshore and onshore markets, gaining from a much stronger midpoint fixing.

“A softer dollar environment has seen Chinese authorities turn the screws on those with short renminbi positions,” ING strategist Chris Turner said.

“For the short term, we think these moves can lift the Asian FX bloc in general and add to the current soft dollar environment.”

The Australian dollar, often seen as a barometer of risk appetite, touched a more than three-month high of $0.6587 earlier in the session. The head of Australia’s central bank said on Tuesday inflation will remain a crucial challenge over the next one to two years, in comments made two weeks after policymakers raised interest rates to a 12-year high earlier to tame high prices.

Oil prices eased, reversing the previous day’s rally. U.S. crude eased 1 per cent to $77.03 per barrel and Brent was at $81.54, down a similar amount.

Spot gold rose to $1977.60 per ounce, its highest level in more than two weeks, aided by the weaker dollar.