Stocks rise, dollar falls; US labor softness fuels rate cut bets
NEW YORK/LONDON : MSCI's global equities gauge rose to a fresh record high on Thursday while U.S. Treasury yields fell with the dollar as data pointing to a softer job market eclipsed a higher-than-expected rise in U.S. inflation in investors' minds.
The Consumer Price Index increased by 0.4 per cent in August, the most in seven months, after a 0.2 per cent rise in July, driven by a 0.4 per cent jump in housing costs and a 0.5 per cent increase in food prices. The cost of food consumed at home jumped 0.6 per cent.
In a separate report, the Labor Department said initial claims for state unemployment benefits jumped 27,000 to a seasonally adjusted 263,000 for the week ended September 6, the highest level since October 2021, whereas economists had on average expected 235,000 claims.
Those numbers solidified expectations that the Federal Reserve would cut U.S. interest rates next Wednesday, and increased bets for more cuts in October and in December.
"The focus shifted away from the CPI print to the jobless claim number. The claims number was a little bit higher than expected, so it is a potential indicator we're seeing further weakness in the labor market," said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions.
"What you're getting is this tug of war between data that's pointing to slowing in the economy, but at the same time the reaction is to price in additional Fed easing, which is giving support to the market."
On Wall Street at 11:23 a.m. ET, the Dow Jones Industrial Average was up 558.69 points, or 1.24 per cent, to 46,049.61, the S&P 500 was up 50.65 points, or 0.78 per cent, to 6,582.68 and the Nasdaq Composite was 148.51 points, or 0.68 per cent, higher at 22,033.93.
MSCI's gauge of stocks across the globe hit a record high for the second day in a row. It was last up 6.39 points, or 0.66 per cent, to 971.19.
The pan-European STOXX 600 index rose 0.5 per cent after the European Central Bank kept its interest rates steady at 2 per cent as widely expected and trimmed its inflation forecasts but offered no clues about its next move, while investors continued to bet more support will be needed. [GVD/EUR]
In U.S. Treasuries, the yield on the benchmark 10-year Treasury note briefly dipped below 4 per cent for the first time since early April after the inflation and jobless claim data.
It was last down 2.1 basis points on the day to 4.011 per cent, while the 30-year bond yield fell 1.6 basis points to 4.6612 per cent.
The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, fell 2.5 basis points to 3.506 per cent.
In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.29 per cent to 97.50.
The euro was up 0.41 per cent at $1.1741 while against the Japanese yen, the dollar weakened 0.25 per cent to 147.09.
Sterling strengthened 0.33 per cent to $1.3574 while the Mexican peso strengthened 0.37 per cent to 18.52 to the dollar and the Canadian dollar strengthened 0.18 per cent versus the greenback to C$1.38.
In commodity markets, oil prices fell after gaining for three days, pressured by concerns over softening U.S. demand and broad oversupply, which offset threats to output from conflict in the Middle East and the Russian war in Ukraine. On Wednesday, Poland's downing of suspected Russian drones had triggered fresh talk of sanctions while Israel had attacked Hamas leaders in Qatar the day before.
U.S. crude fell 1.65 per cent to $62.62 a barrel and Brent fell to $66.52 per barrel, down 1.44 per cent on the day.
In precious metals, spot gold, which hit record highs earlier this week, fell 0.09 per cent to $3,637.02 an ounce. U.S. gold futures fell 0.31 per cent to $3,632.30 an ounce.
