Stock markets mostly climbed on Monday following last week’s strong performance, with gold prices soaring ahead of a meeting of central bankers that could give fresh signals about US interest rates.
Positive data last week eased concerns about the health of the US economy after markets were hammered this month due to recession fears and a Japanese interest-rate hike.
Traders are now turning their attention to the annual symposium of central bank chiefs this week in Jackson Hole, Wyoming.
The highlight will be Friday’s speech by Federal Reserve chairman Jerome Powell, with investors hoping that he will flag an interest rate cut for the Fed’s next policy meeting in September.
“Investors and analysts alike will be paying close attention to any signals from Fed officials about the future direction of US interest rates,” said Luca Santos, currency analyst at ACY Securities.
“There’s growing speculation that… Powell might hint at the possibility of starting rate cuts as early as September. But the size of the cut is still up in the air.”
Santos said a “modest” cut of 0.25 percentage points seems likely while a larger 0.50-point reduction “would need stronger evidence of a weakening US job market”.
All three main indexes on Wall Street rose on Friday, leaving them back near the record highs touched before their August 5 rout as investors grow confident the US economy will avoid recession as the Fed cuts rates.
The gains continued on Monday with the major US markets all up in mid-session trading.
Asian markets wavered after a positive start Monday, while European stocks closed up after a mixed open.
Bets on Fed rate cuts weighed on the dollar, with the yen among big gainers as traders assess the chances of another Bank of Japan hike at its next meeting.
The currency rose sharply on Monday against both the dollar and the euro.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the “big players are increasing bets that the Bank of Japan will continue hiking the rates despite the sharp market reaction”.
Gold was propelled to a new all-time high on Monday, fuelled by expectations for Fed cuts that will make the precious metal more attractive to investors.
The precious metal had climbed to unprecedented heights on Friday, breaking above the $2,500 barrier for the first time.
Oil prices were down again, after last week’s losses, on the back of demand worries as China’s economy struggles to recover.
Investors are also keeping tabs on talks to mediate a ceasefire between Israel and Hamas in Gaza amid fears of a wider war in the crude-rich Middle East.
Major oil producer Iran has threatened to retaliate against Israel for last month’s killing of Hamas political leader Ismail Haniyeh in Tehran, which Iran has blamed on Israel.
US Secretary of State Antony Blinken met Prime Minister Benjamin Netanyahu and other Israeli leaders Monday to press for a deal for a ceasefire and a prisoner-hostage swap.