Global stocks extended their advance on Friday as expectations of a Federal Reserve interest-rate hike this month eased.
The change in market expectations improved investor sentiment and supported gains across major equity markets.
The dollar steadied after falling to a four-month low, while the yen pared some of its recent gains.
Asian Stocks Extend Gains
MSCI’s Asia Pacific equities gauge rose 0.8 per cent.
The gain helped the All Country World Index, the broadest measure of global stocks, record a third consecutive day of advances.
The latest rally followed gains on Wall Street.
Investors responded positively to comments from Federal Reserve Governor Christopher Waller, who indicated that he would support keeping interest rates steady if price pressures continued to ease.
Markets Reassess Fed Policy
Market swaps were pricing roughly even odds of a quarter-point rate hike in September.
That was a significant decline from the approximately 70 per cent probability priced earlier in the week.
The shift suggests that investors are becoming less certain that the Federal Reserve will raise interest rates in the near term.
However, inflation data and future comments from central bank officials will continue to influence expectations.
Dollar and Yen Remain in Focus
A Bloomberg gauge of the dollar was little changed after falling to its lowest level since May.
An index of Asian currencies also rose to levels last seen in October 2024.
Meanwhile, the yen remained a major focus for investors.
The Japanese currency strengthened by about 2 per cent on Thursday, reversing a month-long decline.
Traders increased their expectations of a possible Bank of Japan rate hike.
They also remained alert to the possibility of official intervention to support the yen.
The currency later pared some of its gains and traded at approximately 156.28 per dollar.
Bonds and Gold Retain Gains
Treasury bonds and gold retained gains recorded during the previous New York trading session.
Both assets had benefited from the recent market volatility.
Investors have been reassessing the outlook for interest rates, inflation and economic growth.
These factors have also influenced demand for traditional safe-haven assets.
Earlier Market Sell-Off
Global stocks and bonds received support from Waller’s comments after bond yields surged to multi-decade highs earlier in the week.
The earlier market sell-off was driven by several factors.
They included rising oil prices, hawkish comments from Federal Reserve Chair Kevin Warsh and expectations of a possible US rate hike.
Investors also demanded higher compensation amid years of heavy government spending and persistent price pressures.
In addition, increased corporate borrowing to finance artificial-intelligence development added to concerns about debt levels and market valuations.
Investors Watch Economic Signals
Markets are expected to remain sensitive to inflation data and central bank guidance.
Investors will also monitor oil prices, currency movements and geopolitical developments.
These factors could influence the direction of global equities, bonds and foreign exchange markets.
For now, the easing of rate-hike expectations has provided some relief to investors.
However, uncertainty remains high as markets continue to assess the outlook for monetary policy and global economic growth.
