Global equity markets rose while US Treasury yields fell on Friday as investors tempered their expectations of the scale of the Federal Reserve’s interest rate raising cycle as falling oil prices helped to cool inflation.
Market sentiment has been buoyed by US Labour Department data this week showing a slowdown in consumer and producer prices in July following a series of interest rate hikes by the Fed.
“With inflation now backing off, all the managers who stayed in cash and didn’t believe we could move off the June lows are now being forced back into the market,” said Thomas Hayes, chairman at Great Hill Capital.
The MSCI world equity index, which tracks shares in 50 countries, was up 0.63%. The pan-European index gained 0.16%.
US Treasury yields were down as traders weighed a likely moderation of the Fed’s monetary policy stance. Benchmark 10-year note yields dipped to 2.8639%, after reaching 2.902% on Thursday, the highest since July 22.
“With inflation coming down, consumer confidence is going to be coming back, and employment is still strong, you could see a situation where the market has stabilized and the economic numbers continue to slow based on the lag effect of the Fed tightening that has already happened,” Hayes added.
All three main Wall Street indexes traded higher, led by stocks in technology, healthcare, communication services, consumer discretionary and financials.
The Dow Jones Industrial Average rose 0.76% to 33 588.53, the S&P 500 gained 1.00% to 4 249.25 and the Nasdaq Composite added 1.32% to 12 948.90.
Oil prices dipped around 2% on expectations that supply disruptions in the US Gulf of Mexico would be short-term, while recession fears clouded the demand outlook.
Brent crude futures were down 1.43% at $98.16 a barrel while US West Texas Intermediate (WTI) crude fell 2.02% to $92.42.
The dollar rallied but was set for a weekly drop as traders weighed the improving US inflation data against comments from Fed officials who cautioned that the battle against rising prices was far from over.
San Francisco Federal Reserve Bank President Mary Daly on Thursday said she was open to the possibility of another 75 basis point hike in September.
The dollar index =USD rose 0.561%, while the euro EUR= was down 0.61%.
Gold prices advanced, helped by a drop in US Treasury yields, and setting bullion on path for a fourth straight week of gains.
Spot gold added 0.4% to $1 797.30 an ounce, while US gold futures rose 0.1% to $1 808.50.