TOKYO (AP) – Global shares rose yesterday, with European markets tracking gains in Asia and the United States (US) after some weak economic data raised hopes that the Federal Reserve might ease away from aggressive interest rate hikes.
France’s CAC 40 gained 2.8 per cent in early trading to 5,955.79. Germany’s DAX rose 2.3 per cent to 12,484.83. Britain’s FTSE 100 added 1.5 per cent to 7,013.73. The future for the Dow industrials was up 1.3 per cent at 29,913.00. The S&P 500 future contract rose 1.5 per cent to 3,745.25.
Japan’s benchmark Nikkei 225 added nearly 3.0 per cent to finish at 26,992.21. South Korea’s Kospi gained 2.5 per cent to 2,209.98.
Australia’s S&P/ASX 200 jumped 3.8 per cent to 6,699.30 after its central bank boosted its benchmark interest rate for a sixth consecutive month to a nine-year high of 2.6 per cent.
The Reserve Bank of Australia’s increase of a quarter percentage point to the cash rate was smaller than those at recent monthly meetings.
When the bank lifted the rate by a quarter percentage point at its board meeting in May, it was the first rate hike in more than 11 years. It’s now at its highest point since August 2013, when the bank cut the rate from 2.75 per cent to 2.5 per cent.
Markets in Hong Kong and Shanghai were closed for holidays.
On Monday, a report on US manufacturing came in weaker than expected, along with data showing a drop off in construction spending from July to August. That suggested the Federal Reserve might be able to ease off on raising interest rates to beat down the high inflation damaging households’ finances.
By raising rates, the Fed is making it more expensive to buy a house, a car or most anything else purchased on credit. The hope is to slow the economy just enough to starve inflation of the purchases needed to keep prices rising so quickly.
The Fed has already pushed its key overnight interest rate to a range of three per cent to 3.25 per cent, up from virtually zero as recently as March. Most traders expect it to be more than a full percentage point higher by early next year.
But stresses are building in financial markets and corporate profits have weakened as central banks around the world hike rates in concert.
Besides stocks, lower rates also boost prices for everything from cryptocurrencies to gold, which can suddenly look a bit more attractive when bonds are paying less in income.
The latest update on the US jobs market comes on Friday. Along with reports on inflation, the jobs report is one of the most highly anticipated pieces of data on Wall Street each month.
It will be the last jobs report before the Fed makes its next decision on interest rates, scheduled for November 2. Continued strength would give the central bank more leeway to keep hiking.
Traders say the likeliest move is a fourth straight increase of a whopping three-quarters of a percentage point, triple the usual move.
In energy trading, benchmark US crude added 31 cents to USD83.94 a barrel. It jumped on Monday amid speculation big oil-producing countries could soon announce cuts to production.
Shares of energy-producing companies made big gains. Exxon Mobil leaped 5.3 per cent, and Chevron climbed 5.6 per cent. Brent crude, the international standard, added 45 cents to USD89.31 a barrel.
In currency trading, the US dollar inched down to JPY144.78 from JPY144.81. The euro cost 98.63 cents, up from 98.40 cents.