LONDON/WASHINGTON, Sept 13 (Askume) – U.S. stocks rose on Friday and gold hit a record high after overnight volatility, as investors expected a sharp interest rate cut from the Federal Reserve next week.
Stocks, Treasury prices and commodities all rose as traders raised the chance of a rate cut next week to 41% from about 14% a day earlier, while the Financial Times and The Wall Street Journal reported that “almost a foregone conclusion is this is a pivotal moment.”
In early trade, all three major US stock indexes rose. The Dow Jones Industrial Average (.DJI) rose 0.36%, the S&P 500 index (.SPX) rose 0.26% and the Nasdaq index (.IXIC) rose 0.16%.
Expectations for a deeper rate cut were further fueled when former New York Federal Reserve President Bill Dudley said at a forum in Singapore that “the case for a 50% rate cut is strong.”
In addition to the size of Wednesday’s expected rate cut, the language of the Fed’s policy statement and future forecasts will provide additional basis for market expectations.
“A decision to cut interest rates by 25 basis points rather than 50 basis points could exceed most expectations,” TD Securities analysts wrote in a note. “We believe the dot plot will be the most prominent part of the Fed next week.”
The dollar fell 1.0% against the yen to 140.36 yen, its lowest since Dec. 28. It finally fell 0.83% to 140.61.
Dovish comments from Bank of Japan officials have also provided support to the yen this week, with policy board member Naoki Tamura saying on Thursday he was “concerned that inflation risks are rising.”
The dollar index, which measures the currency against the yen and five other major rivals, fell to a one-week low of 101.00.
Yields pushed the yield on the benchmark 10-year note down 2.1 basis points to 3.659%, while the yield on the rate-sensitive two-year note fell 6.8 basis points to 3.5803%.
Gold and oil prices continue to rise
Global stocks (.MIWD00000PUS) rose 0.45% for a fifth consecutive day.
Gold prices were expected to post their strongest weekly gain since mid-August, rising 0.82% to a record high of $2,579.61 per ounce amid a weaker US dollar and possible interest rate cuts.
Crude oil prices continued to rise on Friday morning, rising 0.78% to $69.51 per barrel as producers assessed Hurricane Francine.
