MSCI’s broadest index of world stocks jumped by nearly 1%
Global stocks rose and the dollar dropped on Monday, after shares soared last week on expectations the U.S. economy would avoid a recession and cooling inflation would spur interest rate cuts.
On Wall Street, stocks added to their recent gains. The Dow Jones Industrial Average rose 0.58%, to 40,896, the S&P 500 advanced 0.97%, to 5,608 and the Nasdaq Composite added 1.39%, to 17,876. MSCI’s broadest index of world stocks climbed by nearly 1%.
The prospect of lower borrowing costs could not sustain gold’s historic highs and the dollar declined against the euro, while the yen rose.
U.S. Fed members Mary Daly and Austan Goolsbee over the weekend flagged the possibility of easing in September, while minutes of the last policy meeting due this week should underline the dovish outlook.
Fed Chair Jerome Powell speaks in Jackson Hole on Friday and investors assume he will acknowledge the case for a cut.
We expect the chairman to convey on Friday that the Federal Reserve is likely to begin easing monetary policy next month, without fully committing to the size of the rate cut, TD Securities analysts wrote in a note on Monday.
Interest rate futures are fully priced for a quarter-point move, and imply a 25% probability of 50 bps with much depending on what the next payrolls report shows.
Yields on U.S. government debt eased on Monday; the yield on benchmark 10-year notes declined 1.9 bps to 3.873%, from 3.892% late on Friday.
Analysts at Goldman Sachs shifted down their U.S. recession expectations to a 20% chance and could push them lower if the August jobs report due in September “looks reasonably good,” analysts stated in a note on Friday.
Broad European shares rose nearly 0.6%, reaching a more than three-week high in broad-based market gains, while the blue-chip FTSE 100 index rose 0.55%.
Investors are anticipating flash PMI data for Britain, France, Germany and the Eurozone later this week.
Earlier, the Nikkei index ended 1.77% lower at 37,388.62, snapping a five-day winning streak that pushed it up 8.7% last week. Chinese blue chips closed around 0.3% higher.
