Global stock markets showed mixed performance on Monday, following a strong rally in U.S. markets driven by expectations that the Federal Reserve will soon start cutting interest rates to support the economy.
In Europe, France’s CAC 40 edged up 0.2% to 7,594.42, while Germany’s DAX dipped by 0.2% to 18,597.20. The UK’s FTSE 100 gained 0.5%, reaching 8,327.78. U.S. stock futures also indicated a positive start, with both the S&P 500 and Dow Jones Industrial Average futures rising by 0.1%.
Oil prices increased after renewed hostilities between Israel and the Lebanese militant group Hezbollah on Sunday raised concerns about potential disruptions in supply.
On Friday, Federal Reserve Chair Jerome Powell signalled a shift in policy, suggesting that the central bank is ready to lower the main interest rate from its current two-decade high. “The time has come for policy to adjust,” Powell stated, noting that future rate cuts will be data-dependent.
This dovish stance boosted the yen against the dollar, with the dollar slipping 0.35% to 143.86 yen in Monday’s trading. The Bank of Japan’s governor hinted at potential further interest rate hikes if inflation continues to approach the 2% target, following a recent increase in the key rate to about 0.25%.
Asian markets reflected varied responses to these developments. Japan’s benchmark Nikkei 225 fell 0.7%, closing at 38,110.22, as the stronger yen weighed on sentiment. Meanwhile, Hong Kong’s Hang Seng index climbed 1.1% to 17,798.73, and the Shanghai Composite index edged up less than 0.1% to 2,855.52. Australia’s S&P/ASX 200 rose 0.8% to 8,084.50, while South Korea’s Kospi ended slightly lower, down 0.1% at 2,698.01.
In U.S. markets on Friday, the S&P 500 surged 1.1% to 5,634.61, coming within 0.6% of its all-time high. The Dow Jones Industrial Average also rose 1.1%, surpassing the 41,000 mark for the first time since its record high in July, closing at 41,175.08. The Nasdaq composite saw the largest gain, jumping 1.5% to 17,877.79.
Powell’s comments marked a significant pivot for the Fed, which had been aggressively raising rates over the past two years to combat soaring inflation. While Powell acknowledged that the job is not yet finished, he noted that several factors contributing to inflation, such as an overheated job market, have begun to ease, allowing the Fed to focus more on supporting the slowing economy.
Smaller stocks, as represented by the Russell 2000 index, led the market with a 3.2% jump, as they stand to benefit significantly from lower interest rates due to their reliance on borrowing for growth. In the S&P 500, more than 85% of stocks advanced.
In the bond market, the yield on the 10-year Treasury fell to 3.79% from 3.86% on Thursday, while the two-year Treasury yield, closely tied to Fed expectations, dropped to 3.91% from 4.01%.
In energy trading, U.S. crude oil rose by 78 cents to $75.61 per barrel, and Brent crude, the international benchmark, also increased by 78 cents, settling at $78.93 per barrel. The euro traded slightly lower, costing $1.1181, down from $1.1190.
Source: AP