Global equity markets surged to new records on Thursday, driven by expectations of imminent U.S. Federal Reserve rate cuts, even as inflation data came in hotter than forecast. MSCI’s world stocks index climbed 0.72% to 971.72, its second straight record high, while Wall Street’s Dow Jones rose 1.36% to 46,108.00, the S&P 500 gained 0.85% to 6,587.47, and the Nasdaq advanced 0.72% to 22,043.08.
The latest U.S. Consumer Price Index rose 0.4% in August, the largest jump in seven months, fueled by higher housing and food costs. However, weekly jobless claims surged by 27,000 to 263,000, their highest since October 2021, signaling labor market weakness. This shift reinforced market conviction that the Fed will begin a rate-cutting cycle at its meeting next week. Traders fully priced in a quarter-point cut, with odds of additional cuts in October and December climbing to 86% and 79% respectively, according to CME’s FedWatch tool.
U.S. Treasury yields fell, with the 10-year note briefly dipping below 4%, while the dollar weakened against the euro, yen, sterling, and other major currencies. The euro rose 0.38% to $1.1738, and sterling gained 0.37% to $1.3579.
In Europe, the STOXX 600 closed up 0.6% after the ECB left rates unchanged at 2% and trimmed inflation forecasts.
Commodity markets turned lower, with U.S. crude sliding 2.04% to $62.37 a barrel and Brent falling 1.66% to $66.37 on demand concerns. Spot gold edged down 0.13% to $3,635.83 an ounce after recent record highs.
Markets remain locked in a tug of war between inflation pressures and weakening labor conditions, but investor sentiment is firmly tilted toward monetary easing, keeping equities buoyant despite global uncertainties.