Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

Stocks gain, U.S. dollar sags as Fed chief shores up rate cut prospects

Published 2019-07-11, 04:54 a/m
© Reuters.  Stocks gain, dollar sags as Fed chief shores up rate cut prospects

* European stocks snap four-day loosing streak

* U.S. futures point to stronger open

* Fed chairman's remarks revive some bets on aggressive rate cut

* Dollar and U.S. Treasury yields sag after Powell's comments

* Oil hits six-week highs a Gulf of Mexico faces storm

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Karin Strohecker

LONDON, July 11 (Reuters) - World stocks rose, global bond yields fell and the dollar weakened after Federal Reserve Chairman Jerome Powell bolstered expectations the Fed would cut U.S. interest rates soon.

The pan-European STOXX 600 .STOXX climbed 0.2% after losing 1.4% over the past four sessions. Germany's DAX futures FDXc1 rose and Britain's FTSE futures FFIc1 gained 0.3%. The oil and gas sector .SXPP as well as defensive stocks led the gains. .EU LIVE/

In his first day of testimony before Congress on Wednesday, Powell confirmed the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war, and said the Fed stood ready to "act as appropriate". statement confirmed we are going in the direction of a cutting cycle," said Charles Zerah, a fund manager at Carmignac. "The main question now is, are investors pricing too much in terms of rate cuts by year end? The way you see equity markets behaving, risk is that what markets are pricing could lead to disappointment."

The Europe gains follow healthy rises in Asia, where MSCI's broadest index of Asia-Pacific shares ex-Japan .MIAPJ0000PUS rose 1%. Japan's Nikkei .N225 added 0.5%.

U.S. futures pointed to a stronger opening for Wall Street as well with E-Minis for the S&P500 ESc1 at 0.2%.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

U.S. stocks ended higher on Wednesday and the S&P 500 .SPX briefly crossed 3,000 points for the first time following Powell's remarks. .N

Some questioned how much momentum there was behind the latest rally.

"We are in the camp and have been all year, and arguably wrongly, that the Fed becoming more dovish and cutting rates is not good for risk assets," said Neil Dwane, global strategist and portfolio manager at Allianz (DE:ALVG) Global Investors. Nine of 12 Fed rate cutting cycles had not stopped a recession, he noted.

"Given we are in the longest expansion and have only had rates lifted to 2.5%, for me it begs the question, is a soft landing possible?"

A strong June U.S. jobs report earlier this month heightened expectations the Fed was more likely to cut by 25 basis points than by 50. But Powell's cautious stance helped fuel bets on heftier easing at its next policy meeting on July 30-31.

The chance of a 50 bps cut rose to 27.6% from 3.3% on Tuesday, according to CME Group's (NASDAQ:CME) FedWatch tool.

Minutes from the Fed's last meeting, in mid-June, however, showed some policymakers felt there was not yet a strong case for easing. rate cut prospects also weighed on the dollar. The dollar index .DXY against a basket of six major currencies slipped 0.2% to 96.929, extending losses for a second straight session after reaching a three-week peak on Tuesday.

The dollar was down 0.4% at 108.03 yen JPY= , forced off a six-week high of 108.990 the previous day. It was still some distance from a six-month trough of 106.780 set on June 25. The euro EUR= nudged up 0.23% to $1.1275.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

In fixed-income markets, the 10-year U.S. Treasury yield US10YT=RR fell to 2.037% after dropping on Wednesday from a three-week high of 2.113%.

Euro zone government bond yields also fell. Germany's 10-year government bond yield dropped to minus 0.32% DE10YT=RR on expectations that monetary easing in the euro zone will not be far behind the Fed.

In commodities, U.S. crude oil futures CLc1 climbed to a six-week high as oil rigs in the Gulf of Mexico were evacuated before a storm, while an incident with a British tanker in the Middle East highlighted ongoing tensions in the region. O/R

U.S. crude oil futures gained 42 cents to trade at $60.84 per barrel. Brent crude LCOc1 futures rose 47 cents to $67.48.

Spot gold XAU= gained to $1,426 an ounce, its highest since July 3, on the reinforced expectations for a Fed rate cut. GOL/

(Reporting Karin Strohecker; additional reporting by Sujata Rao and Marc Jones in London, Shinichi Saoshiro in Tokyo; editing by Larry King)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.