Global stock markets are on course for their best week of the year, buoyed by a worldwide rebound amid signs that the US economy may avoid a recession after all.
Stock indexes around the globe surged today, driven by stronger-than-expected US retail sales last month, which suggested that consumers are holding up despite interest rates remaining at their highest levels since 2001.
MSCI’s main world stock index is on track for nearly a 4% gain over five trading days, while the S&P 500 has rallied 3.7%, and the Nasdaq 100 has soared more than 5%, marking the biggest gains for both indexes since November.
European markets were broadly higher today, although the internationally-focused FTSE 100 was a rare exception, dipping as the pound strengthened following figures showing stronger economic growth in the second quarter.
A stronger pound typically hurts the earnings of many of Britain’s largest companies, which report profits in dollars. Despite this, London’s blue-chip index still posted a 1.6% gain over the week.
Overnight, Tokyo’s benchmark Nikkei index closed 3.6% higher at 38,062.67, reflecting an 8.7% increase for the week. The broader Topix index ended the day up 3% at 2,678.60.
This marks a stark contrast to last week when global markets plunged, with Japan’s stock market suffering its worst loss since Black Monday in 1987, amid fears of a US recession and the unwinding of the yen “carry trade.”
Deutsche Bank analyst Jim Reid commented, “Markets are now basking in a sun-kissed bullish August holiday mood, just nine days after being in a deep freeze of pessimism.
“It’s one of the more remarkable turnarounds in recent memory—not just because it was somewhat justified (given weather distortions in payrolls) but because it happened so quickly.”
Gold surpasses $2,500
The price of gold has exceeded $2,500 per ounce for the first time, as investors flocked to the safe-haven asset amid expectations of a likely US interest rate cut and rising geopolitical tensions.
Gold broke its previous record, set in July, following weak housing construction data that bolstered expectations of an interest rate cut by the US Federal Reserve in September.
Outlook
- In the short term, gold prices are likely to be influenced by the Federal Reserve’s next moves, inflation data, and any unexpected geopolitical developments. If rate cuts are more moderate than expected, gold could face some headwinds. However, if inflation persists or geopolitical risks escalate, gold could see further gains.
- Long-term: Over the longer term, gold could continue to serve as a hedge against economic and geopolitical uncertainty, with its price depending heavily on how these factors evolve.
