NEW YORK: Global equity markets rose to a new high on Friday as US consumer spending in July indicated a strong economic rebound could be ahead. Meanwhile, the Japanese yen surged after Prime Minister Shinzo Abe resigned for health reasons.
The dollar neared lows last seen in May 2018, retreating from Thursday when the Federal Reserve said it would allow inflation to run faster for longer, a stance that would likely lead to a period of prolonged low interest rates.
Longer-term yields fell and gold rose more than 2 per cent as investors sought a perceived store of value in the likelihood of higher inflation and real rates that are negative.
US consumer spending increased more than expected last month, raising expectations for a sharp rebound in growth in Q3, though momentum could ebb as the Covid-19 pandemic lingers and fiscal stimulus dries up.
A US Commerce Department report showed a rise in personal income after two straight monthly declines, while monthly inflation pushed higher. “There’s a big bounce on Main Street, the economic data every day on Main Street is bouncing higher,” said Jim Paulsen, chief investment strategist, Leuthold Group.
MSCI’s benchmark for global equity markets rallied 0.58 per cent to a new closing high. Wall Street also rallied, with the S&P 500 notching its sixth record closing high since confirming a bull market on 18 August. The Dow Jones Industrial Average rose 0.57 per cent, the S&P 500 gained 0.67 per cent and the Nasdaq Composite added 0.6 per cent.