MSCI’s broadest index of Asia-Pacific shares outside Japan reached a one-month high before giving up some gains to trade 0.3% higher
Global stocks hovered near their highest level in a month on Tuesday, while the dollar touched an eight-month low, as investors focused on bets that the U.S. Fed could offer further hints of imminent interest rate cuts.
Fed policymakers have in recent days indicated possible easing in September, priming markets for a similar tone from Powell and other speakers at the annual meeting of global central bankers in Jackson Hole (U.S.).
Markets believe that once the Fed starts reducing rates it will pursue a predictable strategy of lowering them at every, or almost every, meeting over the next 12 months, said Nicholas Colas, co-founder of DataTrek Research LLC.
While that might sound like an aggressive, even worrisome, expectation, consider that eight 25 bp cuts would only take Fed Funds to 3.25% – 3.50%. That is still above the Fed’s own estimate of the neutral rate of interest, Colas added.
Investors hope that monetary policy easing is in the offing to help support stock markets. The S&P 500 shed modest gains earlier in the day to close down 0.2%, the Nasdaq Composite shed 0.3%, and the Dow Jones Industrial Average skidded 0.2%.
That kept a MSCI index for global stocks unchanged near its highest level in more than a month.
In line with expectations of lower rates, the benchmark 10-year Treasury yield dropped to 3.818%.
Futures markets are fully pricing in a 25 bp cut from the Federal Reserve in September, with nearly a 25% probability of a 50 bp cut.
In Europe, the STOXX 600 index eased 0.5%, having recovered most of the losses seen after a weak U.S. labour market report prompted worries about the health of the economy.
Since the report, we have had number after number after number suggesting that a recession in the U.S. economy is not around the corner, said Josephine Cetti, chief investment strategist at Nordea, citing strong U.S. retail sales, upbeat business surveys, improving jobless claims numbers and a benign inflation reading.
The recession fears have been dampened over the past couple of weeks and the market has rebounded a lot, Cetti said.
MSCI’s broadest index of Asia-Pacific shares outside Japan reached a one-month high before giving up some gains to trade 0.3% higher.
Japan’s Nikkei 225 advanced to its strongest level in more than two weeks, closing 1.8% higher, but Chinese blue-chips declined 0.7% on continued concerns over the country’s gloomy economic outlook. Hong Kong’s Hang Seng Index edged down 0.3%.
