Global markets hit new highs

On Thursday, the MSCI global equity index climbed to an all-time peak. At the same time, U.S. Treasury yields and the dollar retreated as expectations of interest rate cuts grew. The softer labor market data outweighed the stronger-than-expected inflation reading.

Inflation accelerated

Consumer prices rose by 0,4% in August, the fastest pace in seven months, following a 0,2% increase in July. Housing costs advanced by 0,4%, while food prices went up by 0,5%. The category of food consumed at home recorded an even sharper gain of 0,6%.

Rate cut expectations

Traders are almost certain that the Federal Reserve will cut rates at its upcoming meeting. The probability of a 0,25 percentage point reduction stands at 100%, while the chances of a deeper 0,5 percentage point move remain around 5%. Expectations for an additional cut in October jumped to 86% from 74% the previous day. The likelihood of another cut in December increased to 79% from 68%.

Wall Street at record highs

All three major U.S. stock indexes closed at record levels:

• Dow Jones Industrial Average: +617,08 points (1,36%) to 46 108,00;
• S&P 500: +55,43 points (0,85%) to 6 587,47;
• Nasdaq Composite: +157,01 points (0,72%) to 22 043,08.

MSCI hits another record

The MSCI global equity index advanced by 6.92 points, or 0.72%, reaching 971.72. This marked the second consecutive day of fresh all-time highs.

Europe in a holding pattern

The STOXX 600 index in Europe closed 0.6% higher after the European Central Bank kept its key interest rate unchanged at 2%. The ECB also lowered its inflation outlook but refrained from offering any forward guidance. Investors continue to bet on the need for further stimulus. Futures on EUROSTOXX 50, FTSE, and DAX also added 0.2%.

Currency market moves

The U.S. dollar index fell by 0.28% to 97.51. The euro strengthened by 0.38%, reaching 1.1738 dollars. The dollar also weakened against the Japanese yen by 0.21%, slipping to 147.15. The British pound rose 0.37% to 1.3579 dollars. Emerging market currencies also gained ground, with the Mexican peso climbing 0.74% to 18.455 per dollar, while the Canadian dollar advanced 0.21% to 1.38 per U.S. dollar.

Asia follows Wall Street

On Friday, Asian stock markets rallied in step with Wall Street. Hopes for rapid rate cuts in the U.S. boosted expectations of cheaper borrowing worldwide, providing relief to stressed bond markets and putting a lid on dollar strength.

Asian markets surge

Indexes in Japan, South Korea, and Taiwan approached or reached record levels. Meanwhile, Chinese stocks hit their highest point in three and a half years, fueled by optimism about profit growth in companies linked to artificial intelligence.

Nikkei sets a new record

Japan's Nikkei index climbed 1.0%, hitting a fresh all-time high and finishing the week with a 4.1% gain. South Korea's KOSPI rose even more strongly, adding 1.3% on the day and nearly 6% over the week.

Chinese equities hold steady

China's blue-chip CSI300 index remained flat but stayed at its highest level since early 2022. Meanwhile, the broad MSCI gauge for Asia-Pacific markets outside Japan advanced by 1.2%.

Currency market shifts

The U.S. dollar retreated to 147.40 yen after briefly touching 148.20 in the previous session. Finance ministers from Japan and the United States issued a joint statement affirming that neither country will target exchange rates in their policies.

The euro hovered around 1.1728 dollars, supported by remarks from the European Central Bank, which kept interest rates unchanged and expressed confidence in its policy stance.

ECB outlook uncertain

Market pricing suggests only a one-in-five chance of monetary easing in December, while about 60% of investors believe the ECB is close to ending the current policy cycle.

Oil prices under pressure

Crude oil prices snapped a three-day rally, falling by more than one dollar. Concerns about weakening U.S. demand and signs of global oversupply outweighed risks of supply disruptions tied to Middle East tensions.

U.S. crude WTI dropped 2.04%, or 1.30 dollars, to settle at 62.37 dollars per barrel. Brent crude declined 1.66%, losing 1.12 dollars to close at 66.37 dollars.

Gold retreats from peaks

After reaching record highs earlier in the week, spot gold slipped 0.13% to 3635.83 dollars per ounce. U.S. gold futures also eased, falling 0.19% to 3636.50 dollars per ounce.