Global stock markets were more stable on Thursday, continuing to rebound after a sharp decline in early August, as investors anticipated that the US Federal Reserve would begin reducing interest rates shortly.
A day after positive U.S. consumer inflation data supported predictions of a September rate decrease, oil prices spiked, and data out of China tempered hopes for an early rebound in the world’s second-biggest economy, the dollar continued to weaken.
U.S. stock futures increased, indicating a promising start to Wall Street. Asian equities also increased as European stocks opened higher despite trade being muted since many nations in the area had public holidays.
The blue-chip Nikkei in Japan increased 0.8% due to data indicating a robust economic comeback in the second quarter, while the blue-chips in China, which opened a new tab, firmed about 1% as weak economic data increased hopes for further stimulus.
After a sharp decline in stocks at the beginning of the month due to fears of a U.S. recession spurred by weaker-than-expected jobs data and the swift unwinding of popular yen carry trades following Japan’s surprise rate hike in late July, the market mood is gradually improving.
The most closely followed indicator of investor fear on Wall Street, the VIX volatility index (.VIX), opens a new tab and is almost at its lowest point since the beginning of the month. On August 5, it reached its peak of four years.
Investors will be keeping a close eye on the U.S. retail sales figures for July, which are expected later in the session, to gauge the pace and scope of Fed rate decreases.
The money markets have fully factored in a September quarter-point rate decrease from the Fed and less than a forty per cent likelihood of a larger half-point move.
In addition, the dollar slightly depreciated to 147.19 yen, while the dollar index, which gauges the value of the US dollar relative to a group of other major currencies, dropped to 102.55, approaching previous lows.
As expected by economists, data revealed that Britain’s economy expanded by 0.6% in the second quarter of 2024, sending the value of sterling up nearly 0.2% to $1.2849.
The unexpected increase in employment helped counteract the decline in major commodity prices, and the Australian dollar gained 0.4% to $0.6624, wiping off early losses.
In other news, Norway’s central bank maintained its policy interest rate at 4.50%, a 16-year high.
As global risk appetite rebounded, European and US bond yields increased, and the price of gold increased by 0.35% to $2,456 an ounce.
Oil prices increased as a result of expectations that prospective rate cuts in the US would stimulate the economy.
