MSCI’s gauge of stocks across the globe gained 7.03 points, or 0.86%, to 824.81
A global equities gauge rose to record levels on Wednesday while U.S. Treasury yields dropped with comments from Fed Chair Jerome Powell fuelling hopes for interest rate cuts as investors awaited crucial U.S. inflation data.
Powell told lawmakers in Congress that he was not yet ready to declare inflation beaten but that the U.S. remained on a path back to stable prices and continued low unemployment and that the Fed was “very focused on staying on that path.”
The U.S. dollar dropped while the euro gained marginally and sterling rallied as comments from the BoE’s chief economist dampened expectations for an August rate cut.
On Tuesday, Powell had told Congress that since the U.S. economy was no longer running too hot the central bank has to weigh risks and would be able to reduce rates once inflation makes more progress.
Powell’s reiterating the message that if inflation continues to cool the Fed should be ready to move rates. It does also feel like he has added a bit more emphasis on the labour market as well, according to Mona Mahajan senior investment strategist at Edward Jones. It looks like September and December are back on the table for rate cuts.
Added to Powell’s comments, Mahajan said the slight decline in bond yields seemed to be supporting equities too.
Investors are also waiting for June’s CPI, due out on Thursday, and the PPI report, which comes on Friday, and expect the data to add to optimism that the Federal Reserve will be able to reduce rates this year.
Traders are currently pricing in a 46% chance that the Fed will cut rates by two notches by the end of December’s meeting and a 70% chance for the first cut in September, shows the CME Group’s FedWatch tool.
On Wall Street, the Dow Jones Industrial Average gained 429.39 points, or 1.09%, to 39,721.36, the S&P 500 added 56.93 points, or 1.02%, to 5,633.91 and the Nasdaq Composite advanced 218.16 points, or 1.18%, to 18,647.45.
MSCI’s gauge of stocks across the globe gained 7.03 points, or 0.86%, to 824.81. This marked the global index’s sixth record high close out of the last 7 sessions as well as its biggest one-day percentage gain since June 12.
Europe’s STOXX 600 index earlier closed 0.91% higher.
In Treasuries, Powell’s dovish-leaning comments sent yields down and a solid U.S. 10-year note auction also marginally added bids to Treasuries that weighed on yields as well.
The yield on benchmark U.S. 10-year notes dropped 1.8 bps to 4.282%, from 4.3% late on Tuesday while the 30-year bond yield dropped 2.5 bps to 4.4702%.
The 2-year note yield, which typically moves in step with interest rate expectations, dropped 0.6 bps to 4.6221%, from 4.628% late on Tuesday.
