Global stocks reached new record highs on Wednesday, driven by a significant rally in tech shares, particularly those of AI chipmaker Nvidia (NASDAQ), which has become the world’s most valuable company. This surge came as U.S. retail sales data pointed towards the possibility of rate cuts later this year, causing the dollar to remain steady.
The MSCI All-World index rose by 0.15% to 805.12, trading near its all-time high of 805.43. The upward momentum in U.S. tech stocks on Tuesday allowed Nvidia to surpass Microsoft (NASDAQ), boosting chipmakers’ shares across Asia.
U.S. stock index futures also saw gains, with Nasdaq 100 futures rising by 0.23% and S&P 500 futures up by 0.1%. In Europe, the STOXX 600 dipped slightly by 0.1%.
The British pound strengthened after data showed that inflation in the UK returned to the Bank of England’s 2% target in May for the first time since 2021. This development is positive for Prime Minister Rishi Sunak and the Bank of England, though it is unlikely to influence a rate cut from the central bank on Thursday or affect the upcoming election.
Lombard Odier economist Samy Chaar noted, “With UK inflation at 2% and U.S. inflation at 2.7% (PCE), this is hardly disruptive. It supports the idea that the Bank of England could act by August, followed by the Fed in September.” Sterling, which had fallen by about 0.2% this month, last traded at $1.2728, up 0.15%. The euro also rose by 0.1% to $1.0747 but remained down by 1% in June, pressured by political developments in France.
Rate Cut Expectations
U.S. markets were closed on Wednesday, resulting in subdued market volatility. Data released on Tuesday showed minimal growth in U.S. retail sales for May, with revised figures for April indicating weaker economic activity in the second quarter. This led to increased expectations of a rate cut in September, with the CME FedWatch tool showing a 67% chance of easing, up from 61% the previous day. Markets are pricing in 48 basis points of cuts this year.
Vasu Menon, managing director of investment strategy at OCBC, cautioned against overreacting to limited data points, stating, “The Fed needs more data to support a rate cut case, and investors shouldn’t overreact to one or two data points.”
Despite mild inflation readings, Fed officials maintain a hawkish stance, adjusting their median projection from three to one quarter-point rate cut for the year. Menon added, “Rate cuts are more likely in 2025, which keeps markets hopeful for substantial easing over the next two years, even if 2024 remains uncertain.”
The dollar index, which measures the U.S. currency against six others, held steady at 105.19. The Japanese yen remained stable, with the dollar trading at 157.92 yen, near last week’s six-week highs. The yen’s value has declined by a third against the dollar over the past four and a half years due to the interest rate gap between Japan and the U.S.
Minutes from the Bank of Japan’s April policy meeting revealed discussions on the weak yen’s impact on prices, with some policymakers suggesting potential rate hikes if inflation exceeds expectations.
Commodities
In commodities, oil prices rose, with Brent crude futures up by 0.6% at $85.80 per barrel and U.S. crude futures gaining 0.48% to trade at $81.96.
👉Explore AI-powered Automated Trading Today! Register for a free trial now!
✅Read about the automated trading software on Investing.com
