Stocks and bonds take heart from Powell; commodities on a roll

Source: Malay Mail

LONDON, April 4 -- Global shares rallied today as US rate cuts remained on the table even if their timing was unclear, while the yen slid against everything except the dollar and gold was pinned near record highs.

There was also action in industrial commodities as oil traded at five-month highs and copper reached a 15-month peak, helping to lift shares in basic materials and energy companies.

Some of these gains were due to supply disruptions and geopolitical tensions, but they also reflect optimism about global growth given a recovery in recent factory surveys (PMI), particularly for China.

Sentiment was aided by a reaffirmation from Federal Reserve Chair Jerome Powell that US rates were still on course to be cut this year, though the timing was data dependent.

S&P 500 futures rose 0.3 per cent and Nasdaq futures 0.4 per cent, while in Europe, the STOXX 600 regional index edged into positive territory.

Government bonds, which have witnessed some of their biggest daily selloffs in months this week, regained some stability on Thursday after a price rally the day before.

The case for easing was underpinned by a survey of the US services sector that showed its index of prices paid fell to the lowest since March 2020, offsetting a worrying rise in the survey of manufacturing released early this week.

"On Powell, markets generally did gain some reassurance from what he said, even though there was nothing really new," Philip Shaw, chief economist at Investec, said.

"That helped, but really the big support to bonds yesterday was the non-manufacturing ISM that showed the headline index much lower than expected, the prices paid index dropping to a four-year low, and the information on supply and delivery times also favourable from an inflation point of view," he said.

The Institute for Supply Management (ISM) survey outweighed a surprisingly strong ADP report, which showed private sector jobs rose 184,000.

Payrolls in sight

While this series has a patchy correlation to the official payrolls report due on Friday, it was strong enough for Goldman Sachs to revise up its forecast for payrolls by 25,000 to a solid 240,000.

Such an outcome would top the median forecast of 200,000 and could lead markets to again pare the chance of a June rate cut.

Fed fund futures have already lowered the chance of a June move to 62 per cent from 74 per cent a month ago.

Yet the bigger shift has been in how fast and far rates are expected to fall, with roughly 73 basis points priced in for this year compared to more than 140 basis points in January.

Investors have also taken 100 basis points of easing out of 2025, so that rates are now seen ending next year around 4 per cent rather than 3 per cent.

That sea change has left Treasuries under water, with 10-year yields hitting a four-month high of 4.429 per cent yesterday before easing back a little to 4.367 per cent currently.

As investors have reeled in their bets on how much and how quickly the Fed might cut rates this year, the dollar has risen across the board, mostly at the expense of the yen, which is around its weakest in nearly 35 years.

The risk of Japanese intervention kept the dollar at ¥151.7 (RM4.8), shy of the ¥152.00 barrier. Other currencies were not so inhibited, and the yen fell sharply elsewhere.

The euro was up 0.2 per cent at 164.72, around its highest in 16 years, as was the Canadian dollar, while the pound was not far from its highest in nine years.

Gold reached a fresh record at US$2,304 (RM10,921) an ounce. The price has climbed 13 per cent since the start of February, driven in part by buying from momentum funds and commodity trading advisors (CTAs).

Meanwhile oil prices were around their highest in five months, supported by flaring geopolitical tensions and the threat of a disruption to supply if the Israel-Hamas war in Gaza spreads to include Iran.

Brent crude eased 0.1 per cent to US$89.24 a barrel, but was in sight of yesterday's five-month top at US$89.99. Three-month copper futures were last up 0.9 per cent on the day at US$9,343 a tonne, having hit their highest since January 2023. -- Reuters