Global shares have paused after a weeks-long rebound towards record highs, leaving the dollar languishing at 2024 lows as investors hoped for clearer clues on Friday from the Federal Reserve on the magnitude of future interest rate cuts.
Oil slipped on easing Middle East tensions and estimates of swelling US inventories, while the weaker greenback kept gold near Tuesday’s record high.
The MSCI All Country index for global stocks was trading down just 0.04 per cent at 824.36 points on Wednesday, less than one per cent from its mid-July lifetime high and up 13.4 per cent for 2024.
In Europe, the STOXX index of 600 companies was up 0.1 per cent at 512.76 points, nearing its record high of 525.59 on June 7.
Stocks have seen a volatile, rollercoaster ride after investors took fright in July following US jobs data that raised the spectre of recession in the world’s biggest economy.
Those worries have since given way to bets on a soft landing cushioned by cuts in borrowing costs starting in September.
Later on Wednesday preliminary revisions to US labour data are due to be published and a large downward revision is expected, helping to support the case for cutting interest rates.
Fed meeting minutes are also expected on Wednesday to reinforce a dovish stance before a speech from the central bank’s chair Jerome Powell on Friday.
Interest rate futures have priced in a 25 basis point US rate cut in September.
Almost 100 bps in cuts are priced in for 2024, and another 100 bps in 2025.
A potentially unique situation beckoned where there were material rate cuts but without a recession, unlike the backdrop for cutting borrowing costs in five of the past seven cutting cycles, said Ross Yarrow, US equities managing director at investment bank Baird.
“If we get a scenario where the Fed are cutting, inflation is falling and employment continues to rise, it really does start to look like a Goldilocks scenario,” he said.
“So I think the rebound in equities and their prospects from here are actually pretty good.”
On Wall Street, the S&P 500 snapped eight sessions of gains with a 0.2 per cent overnight drop as investors took a breather.
US stock index futures were slightly firmer.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent.
Hong Kong’s Hang Seng slid 0.8 per cent, while Japan’s Nikkei fell 0.3 per cent as a recovery from its collapse in early August runs into resistance about the 38,000 level.
On Thursday, US and global purchasing managers’ index surveys are due.
The falling dollar has launched gold to record highs and returned the yen to 146.15 per greenback, a gain of about 1.6 per cent for the week so far and 11 per cent higher than July’s 38-year trough.
The euro is up nearly three per cent for August to date and, at $US1.111 in early European trade, is at its highest since early December and testing major chart levels.
The mood kept bond markets supported and 10-year US Treasury yields nudged lower to 3.81 per cent, while two-year yields hovered at 3.99 per cent.
Commodity prices stabilised with Brent crude futures at $US77.11 a barrel.
Dalian iron ore prices climbed more than four per cent after a Bloomberg report that China plans to allow local governments to buy unsold homes in the latest property-market support measure.
Big miners’ shares were steady in Australia, and gained in London.
Gold prices hovered at $US2,509 an ounce, just below record levels touched on Tuesday.
This post was originally published on Michael West.