On Monday, world equities rose to their highest levels in seven weeks, supported by recent solid corporate earnings and falling expectations for significant interest rate increases. At the same time, the dollar fell against the yen as investors sold off suddenly unprofitable short positions.
Due to slowing economic growth, investors began to anticipate a peak in official interest rates, which led to a 7 percent increase in global equities last month and a rally in bond markets.
Following the 75-basis-point Federal Reserve rate increase last week and remarks on the economy from Fed chair Jerome Powell, the markets have gained momentum.
“There’s a sense of relief that the Fed have at least got an eye on slowing growth. They are not going to be pig-headed and keep hiking interest rates as the economy falls into deep dark recession,” HYCM’s head currency analyst Giles Coghlan made the statement.
The S&P 500 (.SPX) and the Nasdaq index (.IXIC) also experienced their largest monthly percentage gains since 2020 thanks to optimistic predictions from Apple (AAPL.O) and Amazon (AMZN.O) on Friday.
MSCI’s global equity index increased by 0.23 percent (.MIWD00000PUS). After the index increased 1.42 percent on Friday, also reaching seven-week highs, S&P futures decreased 0.18 percent, signalling a lower opening on Wall Street.
At 1400 GMT, the U.S. ISM manufacturing survey for July is scheduled to be released. A Reuters poll predicts an expansionary score of 52.
“We don’t think the U.S. is in a typical recession yet but will almost certainly be within a few quarters,” analysts at Deutsche Bank stated in a note.
“That delay is supportive for markets relative to what was priced a few weeks ago, but it’s hard to say the outlook is positive.”
According to data released on Monday, manufacturing declined in France and Germany.
European equities increased by 0.17 percent, and the FTSE (.FTSE) in Britain increased by 0.33 percent. This week, it is anticipated that the central banks of Britain, Australia, and India would all raise interest rates.
The largest MSCI index of Asian stocks outside of Japan increased 0.15 percent but remained within previous ranges.
As new viral outbreaks weighed on demand, China’s official industrial activity indicator decreased in July, and the Caixin PMI also fell short of expectations.
Chinese blue chips (.CSI300) fell to their lowest levels in six weeks before gaining ground and closing 0.25 percent higher.
South Korea’s .KS11 index remained stable while Japan’s Nikkei (.N225) gained 0.7 percent.
The unexpected turnaround pushed out traders who had been heavily short the yen against the dollar on predictions that rates would rise. Following six-week lows, the dollar was down 0.5 percent at 132.60 yen.
In comparison to the euro, which is struggling with a European energy crisis and barely made any progress last week, the dollar fared a little better. Last seen rising 0.13 percent to $1.0231, the euro.
When compared to its most recent 20-year peak of 109.290, the dollar was down 0.3 percent at 105.650 on a basket of currencies.
The U.S. 10-year rate dropped by the most since the beginning of the pandemic—35 basis points—last month, and bond markets have also been strongly rising. Yields were last at 2.6848 percent, having dropped on Friday to their lowest level in over four months.
The significant inversion of the yield curve suggests bond investors are more negative about the economy than their stock counterparts.
The yield on 10-year Italian government bonds decreased to a two-month low.
It has been a comfort for gold, which was stable at $1,763 per ounce after bouncing 2.2 percent last week, that the dollar and yields have declined.
Oil prices decreased as investors prepared for this week’s meeting of OPEC and other major producers on supply adjustments and as dismal factory data from China and Japan clouded the picture for demand.
U.S. oil prices dropped by 48 cents to $98.13 per barrel, while Brent prices remained stable at $104.17.
