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Markets rally on Powell’s remarks; Commodities remain robust

April 4, 2024 5:27 PM IST

Global shares rallied on Thursday as U.S. 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, particularly for China.

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

S&P 500 futures rose by 0.3% and Nasdaq futures by 0.4%. In Europe, the STOXX 600 regional index was up by 0.2%.

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 U.S. 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.

That sea change has left Treasuries under water, with 10-year yields reaching a four-month peak of 4.429% on Wednesday before slightly pulling back to 4.357% at present.

As investors have reeled in their bets on 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 dollar remained at 151.69 yen, just below the 152.00 mark due to concerns about potential Japanese intervention. Other currencies were not so inhibited, and the yen fell sharply elsewhere.

The euro and the Canadian dollar were both up by 0.4% against the Japanese yen, reaching their highest levels in 16 years. Similarly, the pound was also near its highest level in nine years against the yen.

Gold hit a new high at $2,304 per ounce. This surge, up by 13% since February, was fueled partly by purchases 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. O/R

Brent crude slipped slightly to $89.26 per barrel, staying close to Wednesday’s five-month peak of $89.99. Meanwhile, three-month copper futures rose 1.1% to $9,368 per ton, reaching their highest level since January 2023.

(inputs from Reuters)

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Last updated on: 17th April 2024