Global Stocks Hit Record High as Soft Inflation Fuels Fed Rate Cut Hopes

Global equity markets surged to record levels on Wednesday, buoyed by softer-than-expected U.S. inflation data and growing confidence in a potential Federal Reserve interest rate cut next month. The MSCI All Country World Index climbed to an all-time high of 950.13, while Japan’s Nikkei index broke the 43,000 mark for the first time, extending its winning streak to six sessions. Investors welcomed signs of economic resilience in major economies, with the U.S. dollar edging lower against major currencies.

European markets followed the bullish trend, with the Euro STOXX 600 rising 0.5% and Germany’s DAX adding 0.6%, driven by strong performances in technology and defence stocks. Wall Street futures also pointed to gains, as investors grew more certain of monetary easing after U.S. consumer price index (CPI) data for July came in below expectations. Analysts noted that President Donald Trump’s recent pause on new tariffs against Chinese imports for 90 days further lifted sentiment in global markets.

In Asia, Japan’s economic outlook strengthened as a Reuters poll showed an improvement in manufacturers’ sentiment for the second consecutive month. Meanwhile, data revealed that wholesale inflation in Japan slowed in July, supporting the Bank of Japan’s view that cost pressures from raw materials are easing. This positive outlook helped the Nikkei soar to fresh highs, while cryptocurrencies also gained, with ether nearing a four-year peak above $4,679.

Currency markets reflected the shift in sentiment, with the dollar index down 0.2% at 97.80 and the euro climbing to $1.1706. Traders are now pricing in a 94% chance of a Fed rate cut in September, up sharply from 57% a month ago, according to CME FedWatch data. Market watchers said the inflation report eased fears of stagflation, which had been stoked by a weaker-than-expected U.S. jobs report earlier this month.

Elsewhere, political developments added intrigue to the economic outlook. President Trump nominated White House adviser Stephen Miran to a vacant seat on the Federal Reserve board, while speculation swirled over potential changes to U.S. economic data releases. In bond markets, German 30-year yields fell from 14-year highs, and U.S. crude oil prices eased 0.2% to $62.99 per barrel. Analysts say the combination of cooling inflation, policy uncertainty, and tariff pauses is setting the stage for potentially volatile but bullish trading in the weeks ahead.

Source: Reuters