By Tom Wilson and Rocky Swift
LONDON/TOKYO (Reuters) -Global share markets hit a record and the dollar was subdued on Wednesday, as investors cheered mild inflation data and signs of resilience in major economies, and expectations of a U.S. rate buoyed demand for riskier assets.
The MSCI All Country World Index of shares climbed for a second day and reached 950.13, an all-time high. Japan’s Nikkei stock index, meanwhile, set a fresh peak for a second-straight session.
European stocks advanced 0.5%, with German shares adding 0.6%. Tech and defence stocks led the gains.
U.S. inflation readings, which on Tuesday showed the consumer price index (CPI) rising slightly less than forecast in the year through July, indicated President Donald Trump’s import tariffs had yet to filter down to consumer prices.
That helped Wall Street scale new heights, supported by increasing certainty that the Federal Reserve will cut interest rates next month.
“The fact that CPI was broadly as expected was met with relief, leading to equity gains and tighter credit spreads as investors became increasingly confident about another rate cut,” Deutsche Bank analysts wrote.
Trump’s signing of an executive order pausing triple-digit levies on Chinese imports for another 90 days also boosted optimism.
Wall Street was also set for gains, with a gauge of S&P 500 futures up 0.7%.
In Japan, a Reuters poll that tracks the Bank of Japan’s quarterly tankan business survey showed the Japanese manufacturers’ sentiment index improved for a second straight month.
Another report showed Japan’s wholesale inflation slowed in July, underscoring the central bank’s view that upward price pressure from raw material costs will ease.
The Nikkei rose for the sixth straight day, breaking the 43,000 level for the first time and hitting a fresh record high.
Risk-sensitive cryptocurrency ether rose to an almost four-year high above $4,679.
FED CUT
The dollar index, which tracks the greenback against a basket of major peers, fell for a second day. It was last down 0.2% at 97.80
The dollar fell 0.2% against the yen to 147.47. The euro added 0.3% to $1.1706, after a 0.5% jump in the previous session.
Traders are pricing in a 94% chance of a Fed cut in September, up from about 57% a month ago, according to the CME FedWatch tool.
Investors had been on tenterhooks about the inflation data because it followed a surprisingly weak jobs report on August 1 and had the potential to stoke concerns about stagflation – when an economy suffers both high inflation and high unemployment.
Trump has nominated White House adviser Stephen Miran to temporarily fill a vacant board seat at the U.S. central bank, stirring up speculation about presidential interference in monetary policy.
And the White House said it was “the plan” that the Bureau of Labor Statistics would continue to publish its closely watched monthly employment report after Trump’s pick to head the agency, E.J. Antoni, proposed suspending its release.
Speculation the labour report would be halted has “done the USD no favours and would have only incentivised foreign investors to review their hedging ratios on U.S. investments,” Chris Weston, head of research at Pepperstone, said in a note.
In sovereign bond markets, German 30-year bond yields fell on Wednesday, retreating from the previous day’s 14-year high.
U.S. crude fell 0.2% to $62.99 a barrel.
(Reporting by Tom Wilson in London and Rocky Swift in Tokyo; Editing by Jacqueline Wong, Lincoln Feast and Kate Mayberry)
