MSCI’s world share index, which has moved in excess of 1% on more than half of the trading days in August so far, gained 1.2%
World stocks rose on Thursday and Treasury yields gained after surprisingly strong U.S. retail sales data calmed fears about slowing economic growth, and tempered investor bets of imminent aggressive interest rate cuts.
Retail sales rose 1.0% last month, well above market forecasts for a 0.3% gain, the Commerce Department’s Census Bureau said on Thursday, indicating that consumers have maintained spending by bargain hunting.
Some investors said the robust data did not alter bets that the Fed could begin reducing rates in September, but dimmed the possibility that the central bank will start easing policy with a hefty 50 basis point rate cut.
This diminishes fears of a recession any time soon and it is good news in terms of stocks, but may not be good news for the bond market, according to Peter Cardillo, chief economist at Spartan Capital Securities in New York.
With this report, we are back to square one, with the Fed probably reducing rates by 25 bps in September. Chances are diminishing for a more robust 50 basis-point cut, he added.
Equity markets welcomed the latest sign of economic resilience. The S&P 500 closed 1.6% higher, the Dow Jones Industrial Average gained 1.4%, and the Nasdaq Composite jumped 2.3%.
MSCI’s world share index, which has moved in excess of 1% on more than half of the trading days in August so far, gained 1.2%.
Pressured by speculation that the Federal Reserve is likely to lower rates at a more moderate pace, the benchmark 10-year Treasury yield climbed to 3.9188%, while the two-year Treasury yield jumped to 4.1034%.
The jump in Treasury yields offered some respite to the dollar, which added 0.45% against other major currencies, halting a stretch of losses that took it to its lowest per euro on Wednesday since late 2023. The dollar is also nearly 15% lower against Japan’s yen since early July.
A firmer dollar weighed on the euro on Thursday, with the common currency down 0.4% at $1.09703. The dollar also firmed against the yen to 149.3 yen.
In Europe, the pan-European STOXX 600 index was 1.2% higher, although some analysts cautioned investors against complacency.
Nordea chief market analyst Jan von Gerich said the speed of the Wall Street rebound was a reason to be wary of further volatility ahead.
The tentative rebound in risk appetite has happened surprisingly fast, so I would be cautious, he added.
