Global stocks edge up with dollar, bond yields as Fed rate cuts loom
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., September 10, 2025. REUTERS/Brendan McDermid/File Photo
NEW YORK/LONDON : MSCI's global equities index edged higher on Friday, after registering a record close in the prior session, while U.S. Treasury yields rebounded after sliding the day before when expectations climbed for U.S. rate cuts.
The University of Michigan's Surveys of Consumers showed that U.S. consumer sentiment fell for a second straight month in September to its lowest point since May, as consumers saw rising risks to business conditions, the labor market and inflation.
Consumer inflation expectations for the next year stayed at 4.8 per cent but inflation expectations for the next five years rose to 3.9 per cent from last month's 3.5 per cent.
"The University of Michigan sentiment study came in worse than expected and more importantly inflation expectations remained pretty high. That's sending yields a little higher," said Jack Ablin, founding partner and chief investment strategist at Cresset Capital.
"Investors worry that expectations dictate reality and perhaps consumers will act accordingly if they expect inflation to be higher than usual ... and just perpetuate the inflation hamster wheel."
Wall Street was a mixed bag after all three of its main indexes registered record closing highs on Thursday, when investors reacted bullishly to weaker-than-expected jobs data by ramping up bets that the Federal Reserve would make three rate cuts in a row, including a cut on September 17 after its next meeting.
"The market feels a little stretched and toppy. And now investors in the market are going to focus on next Wednesday and exactly what Jay Powell says, how he says it. Does he sound more dovish? What lines did he delete? What lines did he add?," said Kenny Polcari, partner and chief market strategist at SlateStone Wealth in Jupiter, Florida, referring to Fed Chair Jerome Powell's press conference and the Fed's written statement.
"Rates are going lower for sure but I do think the market has gotten ahead of itself in terms of valuation."
Thursday's U.S. consumer price report had been seen as the last major hurdle before the Fed meeting. But while prices showed a bigger-than-expected increase, market participants kept their focus on a separate report that showed a sharp rise in unemployment claims.
On Wall Street the Dow Jones Industrial Average fell 273.78 points, or 0.59 per cent, to 45,834.22 and the S&P 500 fell 3.18 points, or 0.05 per cent, to 6,584.29. The Nasdaq Composite rose 98.03 points, or 0.45 per cent, to 22,141.10 for another record closing high.
For the week, the S&P 500 gained 1.59 per cent while the Nasdaq rose 2.03 per cent and the Dow climbed 0.95 per cent.
MSCI's gauge of stocks across the globe rose 0.70 points, or 0.07 per cent, to 972.15 and the pan-European STOXX 600 index closed down 0.09 per cent, after giving up earlier gains.
In currencies, the U.S. dollar rose on Friday, a day after falling on a surge in U.S. jobless claims and modest inflation, as investors prepared for interest rate cuts after a roughly nine-month hiatus.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.05 per cent to 97.60.
Against the Japanese yen, the dollar strengthened 0.26 per cent to 147.58.
U.S. and Japanese finance ministers on Friday released a statement reaffirming that neither country would target currency levels in their policies.
The euro was up 0.02 per cent at $1.1735. On Thursday the European Central Bank kept rates unchanged and signalled that it was in a "good place" on policy. After the meeting, ECB sources told Reuters the December meeting would be the most realistic time frame to debate whether another cut was needed to buffer the economy.
Britain's economy recorded zero monthly growth in July, in line with forecasts but showing a sharp drop in factory output, weighing on sterling, which weakened 0.09 per cent to $1.356.
In U.S. Treasuries, yields rose as investors looked ahead to the Fed's policy meeting.
The yield on benchmark U.S. 10-year notes rose 5.1 basis points to 4.062 per cent, from 4.011 per cent late on Thursday, while the 30-year bond yield rose 2.7 basis points to 4.6776 per cent.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 2.9 basis points to 3.558 per cent.
In energy markets, oil prices settled higher after a Ukrainian drone attack suspended loadings from the largest port in western Russia, but gains were capped by concerns about U.S. demand.
U.S. crude settled up 0.51 per cent or 32 cents at $62.69 a barrel and Brent ended at $66.99 per barrel, up 0.93 per cent, or 62 cents, on the day.
In precious metals, gold was showing its fourth weekly gain in a row and trading near its Tuesday record high, as investors looked ahead to U.S. rate cuts. [GOL/]
Spot gold rose 0.3 per cent to $3,644.67 an ounce. It hit a record high of $3,673.95 on Tuesday.
