Global equity markets reached new record highs as optimism over a potential U.S. rate cut bolstered sentiment ahead of the key U.S. jobs report due on Friday. The euro hit a three-week high ahead of the upcoming French elections, adding to the buoyant mood in markets.
In the UK, sterling and stocks rose as the Labour Party seemed set for a landslide victory after 14 years of Conservative rule. This anticipated result provided much-needed clarity and stability for equity markets amid global volatility, according to Ben Ritchie, head of developed market equities at Abrdn.
While European markets shifted focus from the UK election to Sunday’s second-round French election, French stocks began to recover after sharp sell-offs following last month’s surprise election announcement. The euro strengthened further, supported by renewed speculation of a U.S. rate cut.
Trading was subdued following the U.S. July 4 holiday but was expected to pick up with the release of the June U.S. non-farm payrolls report. Guy Miller, chief market strategist at Zurich Insurance Group, highlighted the positive outlook for inflation and the potential for rate cuts, given weaker U.S. economic data.
The MSCI world stock index reached a fresh record high, while European shares and Japan’s Nikkei and Topix indexes also logged record levels. U.S. stock futures indicated a slightly positive opening for Wall Street.
Following the UK election results, London’s FTSE 100 index rose, and the yield on 10-year British government bonds, or gilts, fell, aligning with other European markets. Sterling edged up to around $1.2779.
Market attention remained on the U.S. jobs report, with economists predicting an increase of 190,000 jobs in June, down from May’s 272,000. Employment gains have averaged 230,000 jobs per month over the past year. A softer payroll number could support the case for a U.S. rate cut in September, according to Zurich’s Miller.
In currency markets, the euro climbed to $1.0825 amid polls suggesting France’s far-right National Party would fall short of an absolute majority. The dollar weakened against the yen, while the Australian dollar reached a six-month high.
Bitcoin faced its largest weekly decline in over a year due to concerns about potential token sales from the defunct Mt. Gox exchange and selling by leveraged players. It dropped as much as 8% to $53,523, its lowest since late February.
Gold prices rose by 0.3% to $2,363.25 per ounce, heading for a second consecutive weekly gain. Oil prices were set for a fourth straight week of gains, with Brent crude futures holding above $87 per barrel following a significant drop in U.S. crude stocks, indicating robust demand as the summer driving season commenced.
