Face of Nation : Global stocks rose on Friday as investors firmed up bets on a U.S. interest rate cut at the end of July after a speech by a top Federal Reserve official further cemented expectations for one, fuelling appetite for risky assets and capping the dollar.
European shares opened higher across the board, with the pan-European STOXX 600 index gaining 0.7% in early trade. Britain’s FTSE 100 index gained 0.6% and Germany’s DAX rose 0.75%.
In oil markets, crude surged after the United States said its navy had destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows, raising concerns about supply disruptions out of the region. Iran said all its drones had returned safely to base, and there was no sign of a major escalation in the Gulf.
Comments by New York Fed President John Williams on Thursday made it virtually certain, in the markets’ view, that the Fed would cut interest rates by at least 25 basis points at its July 30-31 policy meeting and also revived expectations of an even deeper 50 bps reduction.
Financial markets reacted quickly, with Fed fund rate futures at one point pricing in an almost 70% chance of a 50 basis point cut. The odds eased to around 40% after the New York Fed said William’s speech had not been about immediate policy direction.
MSCI’s All-Country World Index, which tracks shares in 47 countries, was having its best day in over two weeks, up nearly half a percent on the day. It was, however, still on track to break a six-week streak of weekly gains. E-mini futures for the S&P 500 index were 0.3% higher, indicating a higher opening on Wall Street later in the day.
“Despite a rather lackluster earnings season so far, investors are focusing on the prospect of a considerably easier monetary policy, which is why we see stocks ready to open higher this morning,” said Konstantinos Anthis, head of research at ADSS.
