MSCI’s global equities index stayed close to Thursday’s record levels while the dollar and US Treasury yields rose yesterday after going into reverse in the prior session when expectations climbed for US rate cuts.
Gold was on track for a fourth weekly gain in a row and traded near record levels, potentially signalling persistent investor uncertainties about the global economy.
The University of Michigan’s Surveys of Consumers showed that US consumer sentiment fell for a second straight month in September to its lowest point since May as consumers saw rising risks to business conditions, the labour market and inflation.
European stocks gave up earlier gains to trade slightly lower. Stock markets across Asia made strong gains and Chinese stocks hit a 3-1/2 year high, spurred by AI-related earnings growth expectations.
Wall Street was a mixed bag after all three of its main indexes registered record closing highs on Thursday, when investors reacted bullishly to weaker-than-expected jobs data by ramping up bets that the Federal Reserve would make three rate cuts in a row, including a cut on Sept 17 after its meeting.
“The market feels a little stretched and toppy. And now investors in the market are going to focus on next Wednesday and exactly what Jay Powell says, how he says it. Does he sound more dovish? What lines did he delete? What lines did he add?,” said Kenny Polcari, partner and chief market strategist at Slatestone Wealth in Jupiter, Florida, referring to Fed Chair Jerome Powell’s Press conference and the Fed’s written statement.
“Rates are going lower for sure but I do think the market has gotten ahead of itself in terms of valuation.”
Thursday’s US consumer price report had been seen as the last major hurdle to the Federal Reserve cutting interest rates next week. While prices showed a bigger-than-expected increase, market participants kept their focus on a separate report that showed a sharp rise in unemployment claims.
On Wall Street the Dow Jones Industrial Average fell 181.21 points, or 0.39 per cent, to 45,927.30, the S&P 500 rose 2.16 points, or 0.03pc, to 6,589.63 and the Nasdaq Composite rose 88.75 points, or 0.40pc, to 22,131.82.
MSCI’s gauge of stocks across the globe rose 1.11 points, or 0.11pc, to 972.56. The pan-European STOXX 600 index fell 0.05pc after rising earlier in the day.
In currencies, the dollar pared some gains after signs of weakening consumer sentiment. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.13pc to 97.68.
Against the Japanese yen, the dollar strengthened 0.31pc to 147.65 after US and Japanese finance ministers yesterday released a statement reaffirming that neither country would target currency levels in their policies.
The euro was down 0.09pc at $1.1722. On Thursday the European Central Bank kept rates unchanged and signalled that it was in a “good place” on policy. After the meeting, ECB sources told Reuters the December meeting would be the most realistic time frame to debate whether another cut was needed to buffer the economy.
Britain’s economy recorded zero monthly growth in July, in line with forecasts but showing a sharp drop in factory output, weighing on sterling which fell 0.13pc to $1.3555.
In US Treasuries, the yield on benchmark US 10-year notes rose 5.3 basis points to 4.064pc, from 4.011pc late on Thursday while the 30-year bond yield rose 4.5 basis points to 4.696pc.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 2.9 basis points to 3.558pc, from 3.529pc.
In energy markets, oil prices rose by nearly 2pc yesterday after a Ukrainian drone attack on a Russian port suspended loadings, outweighing pressure from oversupply concerns and weaker US demand risks.
US crude rose 1.35pc to $63.21 a barrel and Brent rose to $67.34 per barrel, up 1.46pc on the day.
In precious metals, spot gold rose 0.4pc to $3,648.39 an ounce. US gold futures rose 0.31pc to $3,648.00 an ounce.
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