World shares rose on and it pinned the dollar near five-week lows on hopes of an eventual slowdown in U.S. monetary tightening following sharp interest rate hikes in June and July. Helping to mellow the mood was news that Shanghai authorities would cancel many restrictions. This on businesses resuming work , easing a city-wide lockdown that began two months ago.
The MSCI’s benchmark for global stocks rose 0.6% to its highest in over four weeks by 0745 GMT. Driven by a positive open in Europe and strong gains in Asia overnight. The index is up 0.4% so far this month.
The pan-European STOXX 600 equity benchmark gained 0.7%, while Japan’s Nikkei (.N225) added 2.2% and Chinese blue chips (.CSI300) firmed 0.7%.
“Talk of a pause in the Fed rate hike cycle is doing wonders for everything ranging from equities to bonds and – unfortunately – commodities too,” said AFS Group analyst Arne Petimezas in Amsterdam. “Over the past few weeks about 50bps has been lopped off from Fed terminal rate pricing. Predictably, Fed pricing suggests the Fed will shift a gear lower after the annual Jackson Hole retreat in August,” he added in a note.
The chance of a less hawkish Fed was enough to see Treasuries rebound, with 10-year note yields just above a six-week low at 2.743%. That is down from a peak of 3.203% on May 9. The steadier market mood has seen the safe-haven dollar and yen decline. While they boosted the euro by hawkish comments from European Central Bank (ECB) officials who have been flagging a rate hike as early as July.
That underscores the importance of this week’s major U.S. data, which includes the ISM survey of manufacturing on Wednesday. And the May payrolls report on Friday. Payrolls are forecast to rise a solid 320,000, though that would be down with unemployment at 3.5%.