Global stocks surge amid uncertainty on U.S. Rate cuts; Yen weakens, Gold hits record highs

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On April 4th, global stocks surged as uncertainty lingered over potential rate cuts in the United States, while the yen weakened against all currencies except the dollar, and gold remained near its highest levels. Additionally, there was notable activity in industrial commodities, with oil reaching its highest point in five months and copper hitting a 15-month peak, leading to gains in basic materials and energy sectors. These increases were influenced by disruptions in supply chains and geopolitical tensions, alongside growing optimism about global economic expansion, especially evident in recent positive factory surveys, particularly in China.

Investor sentiment was buoyed by Federal Reserve Chair Jerome Powell’s reaffirmation that rate cuts in the U.S. were still likely this year, although the timing remained dependent on data. Futures for the S&P 500 rose by 0.3% and Nasdaq futures by 0.4%, while in Europe, the regional STOXX 600 index saw slight gains.

After experiencing significant declines earlier in the week, government bond markets stabilized on Thursday following a rally the previous day. The case for easing was supported by a survey indicating a decrease in the U.S. services sector’s prices paid index to its lowest level since March 2020, counteracting concerns raised by an increase in the manufacturing survey earlier in the week.

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The Institute for Supply Management (ISM) survey had more impact than a surprisingly strong ADP report showing an increase of 184,000 private sector jobs. Looking ahead, there were expectations for the official payrolls report due on Friday, with Goldman Sachs revising its forecast upwards to 240,000, potentially leading to a reduction in the likelihood of a rate cut in June.

As investors adjusted their expectations for rate cuts, the dollar strengthened against various currencies, particularly the yen, which reached its weakest level in almost 35 years. Other currencies, including the euro, the Canadian dollar, and the pound, also saw gains. Gold prices continued to climb, reaching a new record at $2,304 an ounce, driven in part by increased buying from momentum funds and commodity trading advisors.

Meanwhile, oil prices remained high, supported by geopolitical tensions and the potential for supply disruptions due to conflicts in the Middle East. Brent crude eased slightly to $89.24 a barrel, but remained close to Wednesday’s five-month peak. Similarly, three-month copper futures rose to $9,343 a tonne, their highest level since January 2023.