LONDON, Aug 30 — Global equities edged up today as data suggested US inflation pressures were moderating, but were on course to end August with their worst monthly performance of 2023 so far.
MSCI’s broadest index of global shares added 0.2 per cent, following upbeat moves in Asia that continued to benefit from Chinese measures to boost investment in its beaten-down stock market, and weak US jobs data yesterday that sparked hopes the Federal Reserve was done with rate hikes.
Today, European shares nudged higher, while a gauge of Asian shares gained 0.35 per cent and Japan’s blue-chip Nikkei touched its highest in over two weeks.
Wall Street stocks rallied yesterday, with all three of its major stock indexes ending sharply higher. Data showed US job openings dropped to the lowest level in nearly 2-1/2 years in July, signalling inflation pressures caused by a tight labour market and companies were easing ahead of the Fed’s September 19 meeting.
“The US labour market is moving towards better balance,” SEB Group US economist Elisabet Kopelman said in a note to clients, “increasing prospects for the Fed to achieve a soft landing for the economy.”
Still, MSCI’s global stock gauge has fallen more than 3 per cent in August, thanks to hawkish signals from the Fed’s latest meeting minutes and chair Jerome Powell’s speech on Friday at the Jackson Hole central bankers’ symposium.
Europe’s Stoxx 600 share index was steady in early dealings as investors assessed inflation reports from Spain and Germany ahead of the euro zone consumer prices report for August tomorrow.
Spanish inflation rose 2.6 per cent in August, as economists polled by Reuters had expected.
In North Rhine Westphalia, Germany’s most populous state, consumer prices in August rose 0.5 per cent month-on-month and 5.9 per cent year-on-year.
Economists polled by Reuters expect the headline euro zone inflation rate to have moderated to 5.1 per cent in August from 5.3 per cent in July, still far above the European Central Bank’s (ECB) 2 per cent goal.
Euro zone inflation has exceeded the target level for two years. Still, according to Barclays chief European economist Sylvia Ardagna, the ECB might also pause a lengthy rate hike cycle as economic pain deepens.
“The (monetary) tightening cycle is now complete if the growth slowdown pointed to by high frequency indicators is confirmed,” Ardagna said.
Meanwhile, a clearer picture of whether hawkish Fed signals that shook markets in August were overdone will form this week, when US payrolls and personal consumption expenditure reports are due.
For now, markets are pricing in an 87 per cent chance of the Fed standing pat at its meeting next month, the CME FedWatch tool showed. The odds of another pause at the central bank’s November meeting have risen to 51 per cent from 38 per cent earlier this week.
The headline rate of US inflation, at 3.2 per cent for the 12 months to July, is also trending closer to the Fed’s target of around 2 per cent after the world’s most influential central bank hiked rates by 525 basis points (bps) since March 2022.
US Treasury yields were largely stable today after moving lower after yesterday’s jobs data. The two-year US yield, which moves inversely to the price of the government debt instrument and tracks interest rate expectations, was at 4.91 per cent, just above a three-week low of 4.871 per cent touched yesterday.
Germany’s two-year yield rose 7 bps to 3.099 per cent after regional Germany inflation data.
Against a basket of currencies, the dollar inched up 0.15 per cent to 103.68 after slipping nearly 0.4 per cent yesterday.
The euro was 0.2 per cent lower at US$1.0858 (RM5.04).
The yen weakened 0.4 per cent to 146.48 per dollar and remained at levels that led to intervention in the currency market last year by Japanese authorities.
US crude rose 0.2 per cent to US$81.46 per barrel and Brent was at US$85.70, up 0.4 per cent. — Reuters
