Global shares traded around one-month highs on Tuesday, driven by renewed confidence in U.S. interest rate cuts. The weaker yen and a slight dip in the Australian dollar also contributed to the steady dollar. Last week saw a shift in investor expectations for U.S. interest rates, with market pricing indicating the likelihood of rate cuts in the near future.
A significant sell-off in U.S. stocks early in the week was reversed after positive employment data, leading to gains in the benchmark S&P 500 index. Futures in the U.S. pointed to a steady start later in the day, while European stocks received a boost from strong performances by UBS and Unicredit, pushing the STOXX 600 up by 0.6%.
The “Fed put,” a belief among investors that the central bank will intervene to support the economy and financial markets during times of turmoil, has been a key factor driving market sentiment. Traders are now pricing in a drop of around 45 basis points in U.S. rates this year, compared to just 28 basis points priced in the previous week.
The softer-than-expected U.S. jobs data from last week, combined with remarks from Federal Reserve Chair Jerome Powell indicating a potential rate cut, have further bolstered the expectation of lower rates. Interest rate markets are pricing in at least one rate cut in the U.S. this year, likely in November.
In the commodities market, oil prices held steady, with Brent crude futures up slightly to $83.41 a barrel. Gold prices edged down to $2,319 an ounce but remained near recent record highs. Concerns about unfavorable weather conditions in Russia and Brazil have pushed wheat, corn, and soybean prices to multi-month highs.
Overall, the global market outlook remains positive, with investors closely monitoring central bank policies and economic indicators for further cues on market direction. The steady performance of major indices and commodities reflects a cautious yet optimistic sentiment among market participants.
