Written by Herbert Rush and Nell Mackenzie
NEW YORK/LONDON (Reuters) – Global stock markets rebounded on Monday on optimism that major central banks will cut interest rates this year, while the yen, which soared last week amid allegations of Japanese currency interference, fell against the dollar. .
A weaker-than-expected U.S. labor market report on Friday renewed traders’ expectations that the Federal Reserve will ease monetary policy as early as September, sending stocks on both sides of the Atlantic tumbling. Stock prices rose in Asia as well.
The dollar index, which gauges the U.S. currency against six major currencies, closed for the fourth straight session as fears that the Fed would raise interest rates again subsided after Friday’s data showed the weakest job growth since October. It fell.
Brad Conger, chief investment officer at Hartle, Callahan & Co., said Federal Reserve Chairman Jerome Powell “told the market that a rate hike was unlikely. This was his word ‘unlikely.’ “So they took it to mean they wanted rates cut.” Conshohocken, Pennsylvania.
But the inflation outlook remains uncertain, Conger said, as markets expect interest rates to be suppressive enough to slow the economy and slow the pace of price rises.
New York Fed President Thomas Barkin said Monday that the U.S. central bank will lower its interest rate target at an unspecified point, but that monetary policy is in a “very good place” at the moment, and Richmond Fed President Thomas Barkin said that inflation He said the fight will continue. You probably need a hit to request it.
On Wall Street, the Dow Jones Industrial Average rose 0.46%, the S&P 500 rose 1.03% and the Nasdaq Composite Index rose 1.19%.
In Europe, the regional STOXX 600 index rose to 0.53 on signs that the European Central Bank is more confident in cutting interest rates as euro zone inflation continues to slow, three ECB policymakers said. The stock closed up %.
Philip Lane, Gediminas Simkas and Boris Vučić each said inflation and growth data showed eurozone inflation was on track to move from 2.4% in April to the central bank’s target of 2% by the middle of next year. There is a growing expectation that the economy will slow down to a certain point.
The MSCI World Stock Index rose 0.50% to close at 1,066.73, its highest since June 2022. Markets in the UK and Japan were closed for public holidays.
The dollar index fell 0.07% to 105.10, while the euro rose 0.07% to $1.0766. Goldman Sachs announced in a note Friday that it has raised its 2024 EPS growth forecast for STOXX600 companies to 6% from 3%.
According to Goldman, a 10% annual increase in Brent prices would increase annual EPS growth by about 2.5 percentage points, and a 10% depreciation in the euro/dollar exchange rate would increase annual EPS growth by about the same amount.
U.S. Treasury yields are trending lower as investors assess last week’s slowdown in job creation, adding to the view that the U.S. economy is not hot enough to derail interest rate cuts.
The yield on the benchmark 10-year U.S. Treasury note fell 1.3 basis points to 4.487% from 4.5% late Friday.
Traders are currently pricing in a 43 basis point (bp) rate cut by the Fed by the end of the year, with the first rate cut likely in September, according to LSEG’s interest rate probability app. In recent weeks, traders had priced in just one rate cut, citing signs of continued inflation.
Oil prices rose after Saudi Arabia raised oil prices in most regions in June and prospects for an early Gaza ceasefire agreement dimmed, raising concerns that fighting between Hamas and Israeli forces could soon resume. Concerns about this have been reignited.
U.S. crude rose 37 cents to $78.48 per barrel, while Brent crude rose 37 cents to settle at $83.33 per barrel.[O/R]
MSCI’s broadest index of Asia-Pacific stocks outside Japan peaked at its highest since February 2023, closing 0.66% higher, while China’s blue-chip index ended 1.5% higher.
Hong Kong’s Hang Seng index rose 4.7% last week, snapped its longest daily winning streak since 2018 on Friday, and closed 0.55% higher on Monday.
intervention monitoring
Traders remained wary of further fluctuations in the yen after allegations surfaced last week that Japanese authorities intervened to halt the currency’s sharp decline.
Tokyo is thought to have spent more than 9 trillion yen ($59 billion) to support its currency last week, Bank of Japan data suggests, with the yen hitting a 34-year low of $1. It was the lowest level in about a month from $160.245. The highest value for the week was 151.86.
The yen regained some of its gains on Monday, ending 0.63% lower at 153.95 yen to the dollar.
Gold prices also rose as the dollar weakened. U.S. gold futures for June delivery rose 0.9% to settle at $2,331.20 an ounce.
Bitcoin rose 0.65% to $63,343.00, while Ethereum fell 1.2% to $3,077.3.
(Reporting by Herbert Rush; Additional reporting by Nell McKenzie, Lei Wee and Roshan Abraham; Editing by Ed Osmond, Toby Chopra, Nick McPhee and Jonathan Oatis)
