NEW YORK/LONDON :Global stocks edged higher in choppy trading on Friday, making it the fourth consecutive month of gains despite a bout of heavy selling in early August, buoyed by U.S. economic data that has helped the dollar snap a weeks-long losing streak.
The U.S. personal consumption expenditures (PCE) price index – which is the Federal Reserve’s preferred inflation measure – rose 0.2 per cent in July, according to Commerce Department data released on Friday.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5 per cent last month, the report showed. The data sets the stage for the Fed to likely begin easing monetary policy from September.
The Dow Jones Industrial Average finished up 0.55 per cent to 41,563.08, reaching the second consecutive record high close. Benchmark S&P 500 gained 1.01 per cent to 5,648.40 and the Nasdaq Composite gained 1.13 per cent to 17,713.62. For the month, the Dow finished up 1.8 per cent, S&P 500 added 2.3 per cent, and the Nasdaq gained 0.6 per cent.Europe’s Stoxx index closed up 0.09 per cent after touching a record intraday high while Britain’s FTSE 100 eased 0.04 per cent. MSCI’s world share index rose 0.77 per cent, making it a 2.40 per cent monthly gain.
The stunning recovery from an early August sell-off reminiscent of October 1987’s “Black Monday” came as traders priced a so-called Goldilocks scenario, in which the U.S. economy keeps growing but not so much as to prevent interest rate cuts.
Money markets are confidently pricing the Fed’s first 25 basis point cut of this cycle at its September meeting, with a 33 per cent chance of a jumbo 50 bp reduction.
The U.S. economy grew faster than initially thought in the second quarter of this year because of strong consumer spending, and corporate profits, a report on Thursday showed.
“The last few days we’ve started out a little stronger and then drifted during the day and in many cases closed either break even or slightly positive or slightly negative,” said Tom Plumb, chief executive and portfolio manager at Plumb Funds.
“I think that is a sign of a cycle where you start to see people transition to a different environment and it’s not positive for the past leaders,” he added, referring to the so-called “Magnificent 7” tech stocks that were at the forefront of this year’s stock market rally.
Government bonds rallied in early August after a weaker-than-expected U.S. jobs report and a surprise Bank of Japan rate hike wreaked chaos in currency carry trades and drove heavy selling of risky assets.
The yield on benchmark U.S. 10-year notes, which moves inversely to prices, rose 4.2 basis points on Friday to 3.909 per cent. The 2-year note yield, which typically moves in step with interest rate expectations, rose 2.4 basis points to 3.9165 per cent.
“As we’re starting to lay out what our expectations are for an environment with lower interest rates, at least lower short term rates… we’re already starting to see a change in the shape of the yield curve, which impacts the bond market but also the stock market,” Plumb added.
EURO FLAT
The dollar steadied near a one-week high versus a basket of other major currencies, on track to snap a five-week losing streak although still heading for around a 2.5 per cent monthly loss.
Against the yen, the dollar stood at 146.14, set to lose more than 2.5 per cent for the month, as pressure eased on the Japanese currency on the prospect of narrowing interest rate differentials.
Core inflation in Japan’s capital Tokyo accelerated for a fourth straight month in August, data showed on Friday, with the 2.4 per cent price increase signalling further BoJ rate hikes ahead.
The euro was down 0.2 per cent at $1.105, having declined on Thursday after softer-than-expected German inflation data increased bets on further European Central Bank rate cuts.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.48 per cent and ended the month 2 per cent higher. Japan’s Nikkei, following its early August collapse, was down 1.16 per cent for the month after rising 0.74 per cent on Friday.
Oil prices fell. Brent crude futures for October delivery, which expire on Friday, settled 1.43 per cent at $78.80 a barrel, marking a decline of 0.3 per cent for the week and 2.4 per cent for the month.
U.S. West Texas Intermediate crude futures settled down 3.11 per cent to $73.55, a drop of 1.7 per cent in the week and a 3.6 per cent decline in August.
Gold prices weakened but looking at a 2.8 per cent monthly gain. Spot gold lost 0.74 per cent to $2,502.44 an ounce. U.S. gold futures settled 1.3 per cent lower at $2,527.6 [GOL/]
From: channelnewsasia
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