The MSCI All Country index for global stocks was trading down 0.04% at 824.36 points, less than 1% from its mid-July lifetime high and up 13.4% for the year
Global shares paused on Wednesday after a weeks-long rebound towards record highs, leaving the dollar at 2024 lows as investors hoped for clearer hints on Friday from the Fed on the magnitude of future interest rate cuts.
Oil slid on easing Middle East tensions and estimates of swelling U.S. inventories, while the softer dollar kept gold near Tuesday’s record high.
The MSCI All Country index for global stocks was trading down 0.04% at 824.36 points, less than 1% from its mid-July lifetime high and up 13.4% for the year.
In Europe, the STOXX index of 600 companies was 0.1% higher at 512.76 points, nearing its all-time high of 525.59 on June 7.
Stocks have seen a volatile, rollercoaster ride after investors took fright last month following U.S. jobs data that raised the possibility of recession in the world’s largest economy.
Those concerns have since given way to bets on a soft landing cushioned by cuts in borrowing costs starting in September.
Later on Wednesday preliminary revisions to U.S. labour data are due to be published and a large downward revision is expected, helping to support the case for cutting interest rates.
Fed meeting minutes are also expected on Wednesday to reinforce a dovish stance ahead of a speech from the central bank’s chair Jerome Powell on Friday.
Interest rate futures have priced in a 25 bps U.S. rate cut next month, with a 1/3 probability of a 50 basis points cut. Around 100 basis points in cuts are priced in for this year, and another 100 basis points next year.
A potentially unique situation beckons where there are material rate cuts but without a recession, unlike the backdrop for cutting borrowing costs in five of the last seven cutting cycles, according to Ross Yarrow, U.S. equities MD at investment bank Baird.
If we get a scenario where the Fed are cutting, inflation is declining and employment continues to rise, it really does start to look like a Goldilocks scenario, Yarrow added.
So I think the rebound in equities and their prospects from here are actually pretty good, Yarrow added.
On Wall Street, the S&P 500 snapped eight sessions of gains with a 0.2% overnight decline as investors took a breather.
U.S stock index futures were slightly firmer.
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.5%.
Hong Kong’s Hang Seng slipped 0.8% with JD.com declining 8.6% as top shareholder Walmart moved to sell its large stake.
Japan’s Nikkei dropped 0.3% as a recovery from its collapse in early August runs into resistance around the 38,000 level.
