By Isla Binney and Caroline Valetkevich
NEW YORK (Reuters) – Global stock indexes were mostly higher on Tuesday and the dollar strengthened against the yen as strong U.S. retail sales data supported expectations that the Federal Reserve will ease interest rates to tame inflation while avoiding a recession.
Data showed retail sales in June were unchanged from May, when they beat initial expectations.
Echoing comments from Fed Chairman Jerome Powell on Monday, Fed Governor Adriana Kugler said recent data suggests inflation is returning to the central bank’s 2% target. Investors are pricing in at least a 25 basis points (bps) rate cut when the U.S. central bank meets in September, according to CME’s FedWatch tool.
The retail sales data suggests consumers are still spending, and “the market certainly viewed that as positive data,” said Dustin Thackeray, chief investment officer at Crew Advisors in Salt Lake City.
The MSCI World Equities Index rose 3.00 points, or 0.36%, to 831.73. The Dow Jones Industrial Average closed at an all-time high of 40,954.48.
Investors continue to consider the impact of a possible victory for Donald Trump in the upcoming US presidential election following Saturday’s assassination attempt on President Trump.
The former Republican president has voiced support for policies traditionally seen as friendly to domestic businesses, including deregulation, higher tariffs on some foreign imports and lower taxes.
The S&P 500 rose 35.98 points, or 0.64%, to 5,667.20, and the Nasdaq Composite added 36.77 points, or 0.20%, to 18,509.34.
“Obviously the markets liked the prospect of Trump rising in the polls and becoming president. We know what will happen if Trump becomes president,” Thackeray said.
Leading the way for the Dow and S&P 500 was UnitedHealth Group, which rose more than 6% on strong earnings.
In Europe, the STOXX 600 fell 0.28%.
Close race
Polls show a close race between President Trump and President Joe Biden, but Trump has leads in several states that could determine the outcome of the November election.
Financial markets were also shaken by President Trump’s Monday selection of Sen. J.D. Vance of Ohio, a former critic of his, as his running mate.
“Vance has taken a particularly tough stance on China, which is contributing to the weakness in Chinese assets today,” said Mizuho economist Colin Asher.
Trump Media & Technology Group shares gave up some of the big gains they made on Monday, falling 9.1% on the day.
The dollar index, which measures the greenback against a basket of currencies, was little changed at 104.22 after giving up the previous day’s gains, while the euro rose 0.05% to $1.0899.
Against the yen, the dollar rose 0.22% to 158.37.
Investors are still keeping a close eye on the yen after apparent intervention from Tokyo last week disrupted the popular carry trade.
Japanese authorities also warned of possible new measures.
The data on Tuesday showed the Bank of Japan likely intervened a second time on July 12 to support the currency, worth 2.14 trillion yen ($13.5 billion). The previous day’s intervention was thought to have cost about $22.43 billion.
Benchmark 10-year U.S. Treasury yields fell to their lowest in four months amid expectations of a rate cut, dropping 6.6 basis points to 4.163% from Monday’s close of 4.229%.
Oil prices fell for a third straight day. Brent crude futures fell 1.3% to close at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 1.4% to $80.76.
(Additional reporting by Steven Culp and Karen Brettle in New York, Amanda Cooper in London and Stella Chiu in Sydney; Editing by Nick Zieminski and Stephen Coates)
