By Marc Jones
LONDON (Reuters) – World stocks consolidated near all-time highs while the dollar crept up on Thursday, as traders readied for the European Central Bank’s latest interest rate decision as well as new U.S. inflation data later.
High-flying tech shares lifted Japan, Taiwan and South Korea’s bourses to record peaks overnight and Europe was having a steady morning ahead of what is set to be a second hold in a row in the euro zone’s 2% rates from the ECB after lunch. [.T][.EU]
With that and closely watched U.S. consumer price inflation data coming, most traders were keeping their powder dry.
The euro hovered at $1.1690 having soared nearly 13% versus the dollar this year, while the bond vigilantes hadn’t yet managed to decisively push politically strained France’s borrowing costs above Italy’s. [GVD/EUR]
ABN AMRO strategist Benoit Begoc said with the ECB widely expected to hold rates, the focus is on whether it keeps the door ajar for further cuts and its new set of economic forecasts this meeting.
“I think the question will be why are you not cutting rates more?” Begoc said. “We know we have some deflationary pressures and there is no big rise in consumer confidence, so what is the rationale behind that?”
Ahead of the 1215 GMT ECB decision and 1245 GMT press conference, the pan-European STOXX 600 edged up 0.3% while Germany’s 10-year bond yield eased to 2.65% having touched 2.80% – its highest since March – just last week. [GVD-EUR]
In the commodity markets, oil prices also dipped after gaining more than 1% on Wednesday when Poland’s downing of suspected Russian drones triggered fresh talk of sanctions a day after Israel attacked Hamas leadership in Qatar. [O/R]
Safe-haven gold edged away from its recent record highs and bellwether metal copper took a breather from its more than 20% rally since U.S. President Donald Trump’s trade tariffs shook global markets back in April. [/GOL]
TRADERS BET ON TRIO OF FED CUTS
Wall Street futures pointed to more gains there later after a stunning 36% leap in the shares in data services giant Oracle had fuelled the latest records for the S&P 500 and Nasdaq. [.N]
A benign reading on U.S. producer prices had also helped as the money markets priced in more of a chance of three interest rate cuts from the Federal Reserve this year.
Investors have fully priced in a quarter-point move from the Fed at next week’s meeting, with an 8% chance of a 50 basis-point cut.
August’s consumer price index data is due later. A Reuters poll expects headline CPI to rise 2.9% from a year earlier, the biggest increase since January, while the core measure likely held at 3.1%.
“Unless CPI delivers a significant upside shock, investors are likely to maintain their dovish outlook,” said Julien Lafargue, chief market strategist at Barclays Private Bank.
“This shift in inflation dynamics could prove pivotal for the U.S. Fed, which now faces fewer constraints in pursuing a more aggressive rate-cutting cycle.”
Overnight in Asia, Japan’s Nikkei gained 1.2% to hit a record as tech, energy and utilities firms jumped. South Korean shares rose 0.9%.
In Tokyo. SoftBank rose almost 10% after the roaring gains for its Stargate Project partner Oracle. That 36% leap had been the biggest one-day gain since 1992 for the 48-year-old tech giant.
In foreign exchange, movement was largely muted, with the U.S. dollar struggling for direction and the main six currency dollar index a touch above a seven-week trough.
Ten-year Treasury yields edged up 2 basis points to 4.0531%, having fallen 4 basis points on Wednesday after the PPI data and as a solid 10-year note auction alleviated some concern about investor appetite for long-term U.S. debt.
An even more telling gauge will be the Treasury’s $22 billion sale of 30-year bonds on Thursday. The 30-year yield rose 2 bps to 4.7028%, having come down more than 30 basis points since it briefly topped 5% a week ago.
(Additional reporting by Stella Qiu in Sydney; editing by Philippa Fletcher)
