NEW YORK Aug 13 — Global equity markets rose while US Treasury yields fell yesterday as investors tempered their expectations of the scale of the Federal Reserve’s interest rate raising cycle as falling oil prices helped to cool inflation.
Market sentiment has been buoyed by US Labour Department data this week showing a slowdown in consumer and producer prices in July following a series of interest rate hikes by the Fed.
“With inflation now backing off, all the managers who stayed in cash and didn’t believe we could move off the June lows are now being forced back into the market,” said Thomas Hayes, chairman at Great Hill Capital.
The MSCI world equity index, which tracks shares in 50 countries, was up 1.1 per cent. The pan-European STOXX 600 index gained 0.16 per cent.
US Treasury yields were down as traders weighed a likely moderation of the Fed’s monetary policy stance. Benchmark 10-year note yields dipped to 2.8385 per cent, after reaching 2.902 per cent on Thursday, the highest since July 22.
“With inflation coming down, consumer confidence is going to be coming back, and employment is still strong, you could see a situation where the market has stabilized and the economic numbers continue to slow based on the lag effect of the Fed tightening that has already happened,” Hayes added.
All three main Wall Street indexes ended higher, making it the fourth straight week of gains, driven by stocks in technology, healthcare, communication services, consumer discretionary and financials.
The Dow Jones Industrial Average rose 1.27 per cent to 33,761.05, while the S&P 500 gained 1.73 per cent to 4,280.15 and the Nasdaq Composite added 2.09 per cent to 13,047.19.
Oil prices dipped around 2 per cent on expectations that supply disruptions in the US Gulf of Mexico would be short-term, while recession fears clouded the demand outlook.
Brent crude futures fell 1.5 per cent to settle at US$98.15 (RM436.23) a barrel, while US West Texas Intermediate (WTI) crude fell 2.4 per cent to settle at US$92.09 a barrel.
The dollar rallied but was set for a weekly drop as traders weighed the improving US inflation data against comments from Fed officials who cautioned that the battle against rising prices was far from over.
San Francisco Federal Reserve Bank President Mary Daly on Thursday said she was open to the possibility of another 75 basis-point hike in September.
The dollar index rose 0.542 per cent, with the euro down 0.6 per cent to US$1.0255.
Gold prices advanced, helped by a drop in US Treasury yields, and setting bullion on path for a fourth straight week of gains.
Spot gold added 0.7 per cent to US$1,801.76 an ounce. US gold futures gained 0.56 per cent to US$1,799.70 an ounce. — Reuters