LONDON, Sept 16 (Askume) – Global stocks rose for a sixth straight day on Monday, with an easing cycle in the United States almost certain to begin this week, with investors believing it could start with big moves.
The central banks of Japan and England are also meeting this week, with both countries expected to remain on hold for now, while data to be released includes US retail sales and industrial production.
Geopolitical issues are looming large as a second assassination attempt was made on Republican presidential candidate Donald Trump on Sunday, according to the FBI.
But the main focus on Monday will be on growing expectations that the Federal Reserve will cut interest rates by half a percentage point after this week’s meeting, as it seeks to maintain a soft landing for the economy in the face of slowing job growth and tamed inflation.
The MSCI World Index (.MIWD00000PUS) added 0.1%, marking its sixth consecutive gain. The index has risen 10% over the past six weeks as excitement over a sharp rate cut by the Federal Reserve boosted stocks.
“Whether the Fed cuts rates by 25 basis points or 50 basis points, the market’s reaction will depend on two things: how they explain the cut and the reasons for the 50 basis point cut, and what the dot plot is and what it tells us about the current sentiment of Fed members on ultimate interest rate expectations,” said Kathleen Brooks, research director at XTB.
“If the Fed cuts interest rates by 50 basis points first, but reiterates that it is doing so to maintain a soft landing for the economy, that would be a positive for stocks. If it looks like the Fed is going to be nervous about cutting rates because there are some gray clouds on the horizon, then expect stocks to sell off,” she said.
S&P 500 futures and Nasdaq futures fell 0.1%, indicating a slow start for the benchmark indexes after last week’s strongest weekly performance of the year.
In Europe, the STOXX 600 (.STOXX) was steady, retracing earlier losses, as investors booked profits on last week’s 1% gain.
Economic data from China over the weekend showed industrial output growth slowed to a five-month low in August, while retail sales and new home prices weakened further.
Economists at Goldman Sachs and Citigroup lowered their forecast for China’s economic growth for 2024 to 4.7%.
Stock market activity remained slow due to a series of public holidays across Asia.
The Japanese Yen rose
As for the Fed, futures traders see a 59% chance of a half-percentage point rate cut, up from 30% a week ago.
That prospect rapidly diminished after media reports revived the possibility of more aggressive easing.
U.S. Treasuries have risen sharply since the beginning of September, with the yield on the rate-sensitive two-year note falling by 35 basis points. The index fell 1.5 basis points to 3.561% on Monday, its lowest level in two years.
The Bank of England is expected to keep interest rates on hold at 5.00% at its meeting on Thursday, although the market has pegged the chance of another rate cut at 31%.
The Bank of Japan meets on Friday and is widely expected to remain accommodative, though that could lay the groundwork for further tightening in October.
A drop in U.S. Treasury yields gave the yen another boost against the dollar, with the yen falling 0.5% to 140.11 against the dollar on the day, hitting a 14-month low.
The euro rose 0.4% to $1.112, with the euro narrowing towards $1.1200 on the prospect of further ECB interest rate cuts.
A drop in bond yields supported gold prices, which rose 0.2% to $2,582 per ounce, close to a record high of $2,588.81.
Oil prices rose as about a fifth of crude oil production in the Gulf of Mexico remained offline .
Brent crude rose 0.4% to $71.91 a barrel, while US crude rose 0.5% to $69.02 a barrel.
