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Global benchmarks hit record highs as taper worries fade

Global equity benchmarks

The Dow Jones Industrial Average gained 0.02%, the S&P 500 added 0.59%, the Nasdaq Composite advanced 1.02%, Europe’s STOXX 600 added 0.07%, and Japan’s Nikkei rose 0.5%

Global equity benchmarks hit all-time highs on Monday, as the Federal Reserve appeared in no rush to taper its massive stimulus, as U.S. oil prices edged higher in choppy trading.

MSCI’s benchmark for global equity markets hit a record. The S&P 500 and Nasdaq also rose to all-time highs as dovish remarks from the Federal Reserve last week bolstered optimism and eased concerns of a sudden tapering in monetary stimulus. The Dow Jones Industrial Average (DJIA) gained 5.8 points, or 0.02%, to 35,461.6, the S&P 500 added 26.47 points, or 0.59%, to 4,535.84 and the Nasdaq Composite advanced 154.43 points, or 1.02%, at 15,283.93 by 1906 GMT.

Europe’s STOXX 600 added 0.07% and was on course to end August with a rise of more than 2% – its seventh month of gains in what would be its longest such winning run in over eight years. Asian stocks reached a two-week high, with Japan’s Nikkei closing 0.5% higher.

Positive sentiment in equity markets was underpinned by Friday’s Jackson Hole speech by Fed Chair Jerome Powell in which he said tapering of stimulus measures could begin this year, but added the central bank would remain cautious.

The questions now should pivot from the timing of the taper to its speed. How fast will the Fed reduce its purchases from the current $120 billion monthly rate, said Christopher Smart, chief global strategist & head of the Barings Investment Institute.

That will likely be determined by some of the data coming in this week, including U.S. consumer confidence and jobs, but also European inflation and Chinese PMIs. With the market focused on the medium-term, traders have seen any weakness as buying opportunities, said Pictet Wealth Management strategist Frederik Ducrozet.

We are going from great to good – the outlook is not as great as it was earlier this year but it’s still consistent with further equity market gains, he added.

Oil prices edged higher but were off a four-week high as Hurricane Ida weakened into a Category 1 hurricane within 12 hours of coming ashore.

Nearly all U.S. offshore Gulf oil production was suspended in advance of the storm. Focus turned to a meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Wednesday, with sources telling Reuters the group is likely to keep its oil output policy unchanged and continue with its planned modest production increase.

Brent crude futures settled up 71 cents at $73.42 a barrel after hitting four-week highs. They rose more than 11% last week in anticipation of disruptions to oil production from Hurricane Ida. U.S. oil increased 47 cents to $69.21 a barrel, having jumped a little more than 10% over the last week.

Hurricane Ida will dictate oil’s near-term direction, said Jeffrey Halley, senior market analyst at OANDA. If Ida weakens and its path of destruction is lower than expected, oil’s rally will temporarily lose momentum here.

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