Dow Jones Industrial Average closes at record high on US inflation data European stocks hit intraday highs Dollar heads for biggest monthly loss since November Gold prices fall as dollar rises
NEW YORK/LONDON, Aug 30 (Reuters) – Global stock markets rose modestly on Friday in choppy trading, contributing to a sharp rise in the dollar despite heavy selling in early August. It was the fourth straight month of increases, supported by US economic indicators. A losing streak that lasted several weeks.
The U.S. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s recommended inflation measure, rose 0.2% in July, according to Commerce Department data released Friday.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month, the report said. The statistics set the stage for the Fed likely to begin monetary easing starting in September.
The Dow Jones Industrial Average (.DJI) rose 0.55% to 41,563.08 (opens in new tab), setting a new record high for the second year in a row. The benchmark S&P 500 (.SPX) rose 1.01% to 5,648.40 in new tab, while the Nasdaq Composite Index (.IXIC) rose 1.13% to 17,713.62 in new tab. For the month, the Dow Jones Industrial Average rose 1.8%, the S&P 500 rose 2.3% and the Nasdaq rose 0.6%. The European STOXX index (.STOXX) closed 0.09% higher after hitting a new intraday high. Meanwhile, Britain’s FTSE 100 index rose 0.09%. .FTSE), opening a new tab eased by 0.04%. MSCI World Stock Index (.MIWD00000PUS) opened in new tab rose 0.77%, for a monthly gain of 2.40%. The stunning recovery from the early August drop, which was reminiscent of “Black Monday” in October 1987, was made possible by traders pricing in a so-called decline in stock prices. Goldilocks scenario. The US economy continues to grow, but not enough to prevent interest rate cuts.
Money markets are confidently pricing in the Fed’s first 25 basis point rate cut of the cycle at its September meeting, with a 33% chance of a deep 50 basis point rate cut.
The U.S. economy grew faster than initially expected in the second quarter of this year on strong consumer spending and corporate profits, according to a report on Thursday.
Tom Plumb, chief executive officer and portfolio manager at Plumb Funds, said: “The last few days have started off a bit strong, but during the day it’s been volatile and we’ve been trading at breakeven or slightly positive or slightly negative. In many cases, it ended.”
“I think this is a sign of a cycle where people start moving into different environments, and this is not positive for the leaders of the past,” he added, referring to the so-called “Magnificent 7” tech stocks. 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 rate hike from the Bank of Japan disrupted the currency carry trade and triggered heavy selling in risk assets.
One of three traders working on the floor of the New York Stock Exchange (NYSE) on July 3, 2024 in New York City, USA. Reuters/Brendan McDiarmid/File photo
(1/3) Traders working on the floor of the New York Stock Exchange (NYSE) on July 3, 2024 in New York City, USA. Reuters/Brendan McDiarmid/File Photo Purchase License Rights, opens in a new tab
The yield on the benchmark 10-year U.S. Treasury note, which moves inversely to prices, rose 4.2 basis points to 3.909% on Friday. The two-year bond yield generally rose in line with interest rate expectations, rising 2.4 basis points to 3.9165%.
“We’re starting to define what our expectations are for a lower interest rate environment, at least a lower short-term rate environment, but we’re already starting to see a change in the shape of the yield curve and that’s going to impact the economy. “It affects not only the bond market but also the stock market,” Plumb added.
euro flat
The dollar is hovering near one-week highs against a basket of other major currencies and is on track to end a five-week losing streak, although it is still headed for a monthly decline of around 2.5%.
The dollar is expected to fall more than 2.5% for the month to $146.14 against the yen, as pressure on the Japanese currency eases over the prospect of narrowing interest rate differentials.
Core inflation in Japan’s capital Tokyo accelerated for the fourth straight month in August, data showed on Friday, with a 2.4% rise in prices hinting at further interest rate hikes from the Bank of Japan.
The euro fell 0.2% to $1.105 on Thursday after weaker-than-expected German inflation data raised hopes for further interest rate cuts from the European Central Bank. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) opened in new tab rose 0.48% to end the month 2% higher. Japan’s Nikkei Shimbun (.N225) is down 1.16% for the month after rising 0.74% on Friday following a sell-off in early August.
Oil prices have fallen. Brent crude oil futures for October delivery, which expire on Friday, fell 1.43% to settle at $78.80 a barrel, down 0.3% for the week and 2.4% for the month.
U.S. West Texas Intermediate crude oil futures fell 3.11% to settle at $73.55, down 1.7% for the week and 3.6% for August.
Gold prices fell but are expected to rise 2.8% on a monthly basis. Spot gold fell 0.74% to $2,502.44 per ounce. U.S. gold futures fell 1.3% to settle at $2,527.6.
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Reporting by Chibuike Oguh in New York and Naomi Rovnick in London. Editing: Kirsten Donovan and Aurora Ellis
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