(Adds oil, gold settlement prices, updates prices at 2:58 p.m.
ET (1858 GMT)
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Stocks advance around the globe on rate cut optimism
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Trade quiet in London, Tokyo due to UK, Japan holidays
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Weaker yen keeps markets alert to possible BOJ
intervention
By Herbert Lash and Nell Mackenzie
NEW YORK/LONDON, May 6 (Reuters) - A gauge of global
stock markets rose on Monday on optimism that major central
banks will cut interest rates this year, while the yen weakened
against the dollar after a surge last week from Japan's
suspected currency intervention.
Stocks on both sides of the Atlantic advanced, and in Asia
too, as a softer-than-expected U.S. labor market report last
week led traders to revive bets that the Federal Reserve would
ease monetary policy as early as September.
The dollar index, a measure of the U.S. currency
against six major trading peers, was lower for a fourth straight
session after data on Friday showed the lowest jobs gain since
October, easing any angst the Fed might even hike again.
Fed Chairman Jerome Powell "told the market that a hike was
unlikely. Those were his words, 'unlikely,' and therefore they
took that to mean that he wants to cut," said Brad Conger, chief
investment officer at Hirtle Callaghan & Co. in Conshohocken,
Pennsylvania.
However, the rate outlook is still uncertain as the market
hopes rates are restrictive enough to slow the economy and
reduce the pace of inflation, Conger said.
New York Fed President John Williams on Monday said that at
some undefined point the U.S. central bank will lower its rate
target, but for now monetary policy is in a "very good place,"
while Richmond Fed President Thomas Barkin said the battle
against inflation will likely require a hit to demand.
On Wall Street, the Dow Jones Industrial Average rose
0.32%, the S&P 500 gained 0.82% and the Nasdaq Composite
advanced 0.95%.
In Europe, the pan-regional STOXX 600 closed up
0.53% on signs the European Central Bank is more confident about
cutting rates as euro zone inflation continues to decelerate,
three ECB policymakers said.
Philip Lane, Gediminas Simkus and Boris Vujcic said
separately that the inflation and growth data cemented their
belief that euro zone inflation, which was 2.4% in April, will
slow to the central bank's 2% target by the middle of next year.
MSCI's gauge of stocks across the globe rose
0.70%. Markets in Britain and Japan were closed for public
holidays.
The dollar index fell 0.11% at 105.05, leaving the euro up
0.13% at $1.0772.
Goldman Sachs ( GS ) raised its 2024 EPS growth forecast for STOXX
600 companies to 6% from 3% earlier, the bank said in a
note on Friday.
According to Goldman, a 10% annual rise in Brent prices adds
about 2.5 percentage points to annual EPS growth, and a 10%
weaker euro/dollar exchange rate adds about the same.
Treasury yields ticked lower as investors assessed last
week's subdued job creation, which reinforced view that the U.S.
economy was not overheating enough to derail a rate cut.
The yield on benchmark U.S. 10-year notes fell
0.9 basis points to 4.492% from 4.5% late on Friday.
Traders are now pricing in 44 basis points of Fed rate cuts
by year end, with the first cut possibly in September, according
to LSEG's rate probability app. In recent weeks, traders had
priced in just one cut due to signs of sticky inflation.
Oil prices rose after Saudi Arabia hiked June crude prices
for most regions and as the prospect of a quick agreement for a
Gaza ceasefire deal appeared slim, reviving fears that combat
between Hamas and Israeli forces will resume soon.
U.S. crude settled up 37 cents at $78.48 a barrel and
Brent rose 37 cents to settle at $83.33 per barrel.
MSCI's broadest index of Asia-Pacific shares outside Japan
peaked at its highest level since February 2023
and closed 0.66% higher, while China's blue-chip index
ended up 1.5%.
Hong Kong's Hang Seng Index rose 4.7% last week and
on Friday clocked its longest daily winning streak since 2018,
closing on Monday 0.55% higher.
INTERVENTION WATCH
Elsewhere, traders remained on alert for further volatility
in the yen, after last week's bouts of suspected intervention
from Japanese authorities to stop a sharp slide in the currency.
Tokyo is suspected of having spent more than 9 trillion yen
($59 billion) to support its currency last week, as suggested by
data from Bank of Japan, taking the yen from a 34-year low of
160.245 per dollar to a roughly one-month high of 151.86 over
the span of a week.
The yen gave back some of those gains on Monday
and was last 0.63% lower at 153.95 per dollar.
Gold prices climbed as the dollar weakened. U.S. gold
futures for June delivery settled 0.9% higher at
$2,331.20 per ounce.
Bitcoin gained 0.74% at $63,401.00 and ethereum
declined 1.22% at $3076.7.