GLOBAL shares extended gains yesterday after key US economic data solidified investor expectations of a Federal Reserve rate cut next week, a likelihood that weighed on the dollar and boosted gold.
Wall Street stocks added to gains in early trade and were set to rise for the second straight week, with communication services, technology and energy shares in the driving seat.
The Dow Jones Industrial Average rose 0.46 per cent, the S&P 500 rose 0.50pc, and the Nasdaq Composite rose 0.62pc.
European stock markets were propelled higher by gains in mining stocks after the price of copper hit record highs. The STOXX 600, which has gained 0.74pc this week, was up 0.32pc on the day.
MSCI’s index of stocks across the globe rose 0.39pc, on track for the second straight session of gains.
In September, the Personal Consumption Expenditures (PCE) Price Index – which is the Fed’s preferred inflation gauge – increased 0.3pc, in line with analyst expectations. US consumer spending increased marginally in September but eased from the prior month, suggesting a loss of momentum in the economy, according to US Commerce Department data.
The report was delayed by a record 43-day government shutdown.
The Fed is widely expected to cut interest rates by 25 basis points at the end of its policy meeting next week. Investors are pricing in a near 90pc chance of a rate cut, according to the CME’s FedWatch tool.
“The Fed has been so accommodative to markets – especially as it’s telegraphing really well its rate cuts in advance – that these equities markets look in pretty good shape going into the end of the year,” said Andrew Wells, chief investment officer at SanJac Alpha in Houston.
“The Fed will cut. I think there’s very little question about that and it’s priced in,” Wells said.
In currency markets, the euro was up 0.1pc against the dollar at $1.1654. The dollar was flat at 155.14 against the Japanese yen.
The dollar was down against major currencies after snapping a 9-day losing streak in the previous session. The greenback has been weighed down by Fed rate cut expectations.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.17pc to 98.91.
Japanese government bonds have led a global debt selloff this week. Yields on 10-year JGBs have hit their highest point since mid-2007, while 30-year yields have hit record highs, after the Bank of Japan gave its strongest signal yet that rates were likely to rise this month.
“If they do proceed, that would take the policy rate up to 0.75pc, the highest since 1995,” said Jim Reid, a strategist at Deutsche Bank.
“That’s led to a hawkish reaction among Japanese assets, with the yen strengthening 0.18pc this morning against the US dollar, whilst the Nikkei is down 1.29pc,” he said.
With the BOJ widely expected to deliver a rate rise just as the Fed resumes cutting, investors are buying the Japanese yen against the dollar as interest rates in the two countries edged towards one another.
Traders frequently borrow the yen to then sell it and buy higher-yielding assets in dollars, like tech stocks or cryptocurrencies – a practice known as a carry trade. A stronger yen puts billions of dollars invested in this trade at risk.
The yield on benchmark US 10-year notes rose 0.4 basis points to 4.112pc. The two-year note yield, which typically moves in step with Fed rate expectations, rose 0.9 basis points to 3.54pc.
In commodities, benchmark copper futures hit an all-time high of $11,705 a metric tonne earlier, after Citi upgraded its price forecast based on supply concerns and expectations for a Fed rate cut.
Brent crude futures rose 1pc to $63.93 a barrel, while gold was up 0.85pc to $4,244.63 an ounce. Silver was up 3.27pc at $58.96 an ounce.
Meanwhile, stock markets in the UAE rose yesterday.
Dubai’s main index advanced 0.9pc, extending gains to a fourth session, lifted by gains in heavyweight real estate and banking sector stocks.
Blue-chip developer Emaar Properties and its construction arm Emaar Development climbed 2.9pc and 4.7pc respectively, while banking giants Emirates NBD Bank and Dubai Islamic Bank jumped 2.5pc and 1.1pc. Emaar Properties unveiled ‘Dubai Square’, a next-generation flagship retail and lifestyle hub at the heart of the 180 billion dirhams Dubai Creek Harbour mega-development.
Abu Dhabi’s benchmark index settled 0.4pc higher, supported by a 2.5pc rise in Aldar Properties and a 3pc hike in energy shipper Adnoc Logistics and Services. Aldar and Mubadala Capital announced Aldar Capital, a platform linking global institutional investors to prime real estate and infrastructure opportunities across the UAE and wider GCC. Its first fund, planned for launch in 2026, is seeking to raise $1bn in capital.
Dubai index recorded 2.5pc gain in the week, its biggest increase in more than four months, while Abu Dhabi closed the week up 2.1pc, its best performance since late June, according to LSEG data.
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